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Timeline for EMIR regulation must be extended – Dutch Pension Federation

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EUROPE - Several parts of the EMIR regulation on over-the-counter (OTC) derivatives should be revised and the timeline for introducing the new measures extended, the Dutch Pension Federation has said.

Following the temporary exemption for pension schemes from the EMIR regulation, pension fund representatives were invited to respond to the consultation paper on the draft technical standards of the directive launched by the European Securities and Markets Authority (ESMA) last month.

In its response to the consultation paper, the Pension Federation said it "strongly" supported all rules and regulations with respect to OTC derivatives incorporated within the EMIR.

However, it argued that several amendments should be made to the technical standards of the directive.

Among the 83 questions raised by ESMA in the consultation paper, one in particular could be a source of concerns for some pension schemes.

In question number 13, ESMA asked what period of time should be considered for reporting unconfirmed OTC derivatives to the competent authorities.

One Dutch response to the consultation - prepared jointly by the Pension Federation, APG, PGGM and MN - highlighted the concerns of local pension funds over the disclosure of information when reporting unconfirmed OTC derivatives.

They point out that some schemes have large positions that must be placed in the market gradually over a number of days, adding that any unconfirmed trade reporting would cause information leakage.

They therefore argue that the confidentiality of pension funds' trade information should be guaranteed.

Gerard Riemen, director of the Pension Federation, said: "Due to our very large and one-sided OTC derivatives positions, immediate disclosure of the data in respect of our positions to our competitors and/or other market participants will have severe adverse effects on our ability to trade and our possibility to hedge liabilities.

"Our competitors and other market participants may use our position data to plan their trades, which could be extremely harmful for us."

Riemen went on to say that immediate public disclosure of Dutch pension funds' position data could lead to "front-running" by market participants that are aware of the large transaction volume.

"For these reasons," he said, "OTC derivatives-position data should only be disclosed to the public on an aggregated basis and with an appropriate delay period."

The Pension Federation also underlined the importance of acknowledging the interests of buy-side clients such as pension schemes in relation to the governance of central counterparties' (CCPs).

Riemen said: "We feel it should at least be ensured that buy-side clients have a meaningful representation in the risk committee or board of a CCP."

According to the Pension Federation, buy-side clients should also be involved in the procedure to amend existing documentation and pricing, while information should be equally and fairly disseminated and disclosed to clearing members and their clients.

It also sought to remind ESMA and the European Commission that the proposed technical standards could not be implemented within a short timeframe.

ESMA launched its consultation paper on the draft technical standards for the regulation on OTC derivatives, CCPs and trade repositories last month, setting the deadline for 19 March.

The European authority is reported to have received more than 100 responses from banks, asset managers, pension fund representatives, insurance companies, issuers, consultants and broking firms.

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