EU snub to clearing carve-out hurts optimisation efforts

Forcing firms to clear risk-reducing trades would squeeze collateral and potentially hike liquidity risk, dealers warn

Derivatives dealers were confident a regulatory exemption for so-called optimisation trades would drive smoothly through the European Union’s legislative process. But now lawmakers appear to have slashed the tyres.

The European Commission (EC) released proposals on December 7 altering the EU’s regime for central clearing, known as the European Market Infrastructure Regulation, or Emir. Missing from the tweaked rules was a hoped-for carve-out that would exclude optimisation trades from mandatory