LONDON (Reuters) - A March deadline for financial firms to post cash to cover uncleared derivatives transactions is “unrealistic” and regulators should help ease pressure on the industry, a top U.S. regulator said on Friday.
Financial firms in the United States will have to post a so-called “variation” margin on swaps trades that have not passed through a clearing house, a third party which ensures a trade is completed, even if one side of the transaction goes bust.
It is among the key reforms agreed by world leaders at the height of the 2007-09 financial crisis to make derivatives markets safer and more transparent.
Christopher Giancarlo, a commissioner at the U.S. Commodity Futures Trading Commission (CFTC), which regulates derivatives in the United States, said the March deadline will pose a massive challenge for market participants.
“Derivatives users must now be working to modify their existing collateral agreements or draft new ones,” he told a conference held by industry body ISDA in London.
“Unfortunately, regulators imposed an unrealistic deadline on the marketplace and seem intent on sticking to that deadline regardless of the effect on the health of the market and market participants,” Giancarlo added.
“As the variation margin deadline approaches, I call on my fellow regulators to determine the market’s readiness and help ease the transition as much as possible to ensure the orderly functioning of the marketplace.”
Reporting by Huw Jones, editing by