The European Association of Co-operative Banks (EACB) has co-adopted a position paper together with the International Swaps and Derivatives Association, the Alternative Investment Management Association, the European Banking Federation, the European Fund and Asset Management Association, Invest Europe, the Managed Funds Association, and the Nordic Securities Association, recommending a permanent exemption from the margin requirements for equity options from the European Market Infrastructure Regulation (EMIR) margin requirements.
The rationale behind this recommendation is because equity options play a significant part in the real economy, and thus:
- imposing variation and initial margin requirements on these instruments would increase funding costs and operational complexity;
- such requirements could even push out smaller EU counterparties from using equity options for hedging and risk mitigation purposes; and
- given that some major jurisdictions are permanently exempting equity options from margin requirements, there could be a competitive disadvantage for EU market participants when dealing with non-EU counterparties.
Please refer to our position paper for further information on our rationale and recommendations.