European Swap Trading: Slow and Steady Wins the Race?

Europe is finally beginning to implement the much-delayed program of reforms that will require an overhaul of pre-trade requirements as the Markets in Financial Instruments Directive and Regulation (MiFID II/MiFIR) come into force over the next two years, starting with the clearing mandate. This new regime will reshape the landscape for all swap market participants. The regulations have helped increase flows to central clearing houses, which in turn, has driven swap compression and altered broker relationships. Meanwhile, the global picture has been muddied by the proliferation of different regional regimes. Data and reporting are not harmonized and this poses a great challenge for global players with large swap portfolios. Europe may benefit from the emerging global infrastructure.