The European Commission is giving pension systems a two-year grace period before they have to begin complying with new derivative trading rules, according to Chief Investment Officer.
The new rules set up a central clearing house for derivatives trades. But the rules could be costly for pension funds – hence the two year exemption.
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The European Market Infrastructure Regulation (EMIR) requires the establishment of central clearing houses for the trading of certain types of derivatives.
These counterparties are expected to raise costs for pension funds and other parties substantially under the current iteration of the rules, as investors would need to hold more collateral against the derivatives they trade.
Pension funds would still be expected to use central clearing houses alongside other investors and traders, but the delay gives the clearing houses time to “find solutions for pension funds”, a statement from the European Commission said.
“Given that pensions hold neither significant amounts of cash nor highly liquid assets, imposing such a requirement on them would require very far-reaching and costly changes to their business model which could ultimately affect pensioners’ income,” the Commission said.
Read more about the European Market Infrastructure Regulation (EMIR) here.