Financial Reform panel at IDX

2013 is proving to be a crucial year in the implementation of regulatory reform. The US regulator, the CFTC (Commodity Futures Trading Commission) has stolen a march on its global equivalents and has nearly completed the implementation of the 2010 Dodd-Frank Act.

The fact that America is so far ahead of the rest was acknowledged by David Bailey, head of markets infrastructure & policy, Financial Conduct Authority. “The US has played a leading role in regulatory reform with the implementation of Dodd-Frank,” he began.

“Progress is being made in Europe but we’re some way from finalising and implementing the rules.” He also added that it is important not to rush the implementation of EMIR (the European Market Infrastructure Regulation) since, “It’s a priority to get this right, not to rush it.”

Timing is an issue for everyone, a point acknowledged by Mark Wetjen, commissioner, CFTC. “The timing issue is very relevant,” he said. “There is a balance to be struck in timing compliance with the infrastructures that need to be put in place. It looks like Europe will have most things in place by year end, but there are other global jurisdictions that were part of G20 that are someway behind and that’s an issue that I’m not sure what to do about.”

Philippe Guillot, executive director, markets, Autorite des Marches Financiers, was more upbeat about the global outlook. “I’m confident that a global solution will be found,” he began. “Things are going pretty well at the technical level, look at LEIs (Legal Entity Identifiers) for example. The differing approaches can be overcome since we’re all looking at the same thing.”

“The mismatch in timing creates the confusion and discussion around regulatory reform,” suggested Sander van Leijenhorst, senior supervision officer, Market Infrastructures Netherlands Authority for Financial Markets. “We need to know more from the regulators under EMIR. How do we enforce the various rules? We need them to be made clearer. Beyond that, we need to see if the markets pick them up.”

The sentiment that regulators need to make themselves clearer is one that has been expressed to us before in many organisations and entities that are directly affected by EMIR. ESMA (the European Securities & Markets Authority) hasn’t been as outwardly proactive as the CFTC, its US counterpart. Indeed, there has been a succession of delays in the EMIR implementation timeline that are posing serious questions about equivalency between Dodd-Frank and EMIR. How closely will EMIR track Dodd-Frank? We’re still unsure…

“We need to explore the specifics of each regime,” says David. “The level of collaboration globally should ensure that we end up with a sensible and pragmatic outcome – we need time to get there.” Sander also points out that, “the devil is in the detail – and we need to get it right.”

The session, whilst highlighting many of the on-going issues that have arisen out of the “G20 signing up to a very ambitious set of commitments,” according to Mark, “we’re all working very hard to get there.”

“It’s critical that everyone pulls in the same direction to achieve the same outcome,” concluded David. “There’s an awful lot of collaboration going on and there is a lot of work going on with the regulators so that firms in the industry can be as ready as possible.

“The details have been known for some time and there is no excuse for firms not to be preparing for what’s coming down the road. Most of the detail is there and we won’t be looking too kindly upon firms that are not prepared.”

The direction of the reforms is clear at a global level, but the timing is not. Whilst the US has gone full steam ahead with its reforms, the rest of the world is still some way behind. As they all said, though, you can’t, nor should you, rush these things.