EU Warns Businesses to Brace Themselves for Swap Reform

The deadline for European countries to begin reporting swaps trading is quickly approaching, even though many businesses may not be ready for large scale swap reform.

Beginning on February 12th, derivative transactions made by businesses in the EU will have to be reported to data banks known as trade repositories. This will be one of the EU’s first steps toward swap reform geared toward preventing a financial crisis similar to 2008 from occurring again.

The rules the EU are putting in place are similar to the sap reform rules set by the CFTC in the US. However, rather than take a staggered approach to implementation, the EU will be putting its rules in place all at once. The method could be a bit overwhelming for some businesses.

Perhaps the biggest issue with the EU’s plans is their decision to require reporting from both sides of the transaction, rather than just the sell side, which could be problematic for non-financial companies who may not have all of the correct systems in place.

Many businesses have warned that they may not have all of the systems in place in time for the February 12th deadline, but it seems unlikely the EU will be moving the date back.

Leaders are hopeful however, that the regulator will take a similar approach to the UK’s system according to Bloomberg, in which they are not planning to implement heavy penalties immediately following the deadline.