Vice President – Head of Legal (Europe)
Hi Mitja, tell us about your background and your role at the FIA?
I joined FIA (then the Futures and Options Association) in November 2012 and I’m currently FIA’s Vice President of Legal in Europe. My main responsibilities include managing the FIA documentation services, addressing legal issues as they arise in the context of derivatives clearing in Europe and cross-border, advocating for changes to derivatives regulation/legislation in Europe on behalf of members, and helping FIA members understand and achieve a more favourable capital treatment under the Basel III (CRDIV/CRR) rules for their cleared derivatives exposures. Prior to joining FIA, I worked for UniCredit Bank in Slovenia first as a trainee and later as legal counsel. I occasionally work (part-time) for the London School of Economics as a research assistant and summer school teacher in international financial regulation.
With Brexit dominating the news even more so than usual of late, market access to the UK and EU27 is a matter of uncertainty. What are your thoughts on this matter?
FIA focuses on market access with respect to cleared derivatives and in the context of Brexit we emphasise the need to minimise disruption to market access, avoid fragmentation of liquidity and maintain global access to both markets and counterparties. In response to the financial crisis, the G20 committed that in order to promote financial stability, certain standardised and liquid derivatives contracts should be declared to be subject to the mandatory trading on trading venues and the mandatory clearing via clearing houses. That is only possible, and financial stability can only be promoted in that way, if you can access the location at which global liquidity is located. Access to global liquidity pools reduces costs, improves risk management and strengthens financial stability.
What other factors are having an impact on cross-border business within Europe at present?
Given that the largest EU financial market is about to leave the single market, certain amendments are likely required to the EU financial services legislation to make sure that the rules are still properly calibrated to work and achieve desired outcomes in the EU27. Changes have also been proposed with respect to the current regime under which third-country firms service European clients and these changes, if adopted, will have impact not only on the UK-EU27 business, but also on the access to EU27 markets by all other third-country firms.
A significant part of your focus last year was on MiFID II rules as they apply to cleared derivatives. Has your workload on this matter begun to ease yet as we move towards 2019?
FIA was heavily involved in MiFID II implementation last year by producing template documentation, providing industry guidance, seeking regulatory clarity on a number of MiFID II issues, as well as by holding events to discuss relevant MiFID II requirements with the regulators and policy makers. Firms are now busy meeting their MiFID II requirements on a daily basis, so our workload in the area of MiFID II has eased as a result. Having said that, there will soon come a point in time for a stock taking exercise and for assessing the impact of MiFID II and the impact of Brexit on MiFID II.
There’s currently a major piece of legislation going through Brussels to enhance the supervision of Central Counterparties (CCPs). What impact do you think this will have on the derivatives industry when it is adopted?
There are currently two legislative initiatives to amend the European Market Infrastructure Regulation (EMIR). The first one, also known as EMIR Refit, looks to eliminate disproportionate costs and burdens to small companies, and to simplify rules without putting financial stability at risk. The second set of proposed amendments, often referred to as ‘EMIR 2.2’, focus on the supervisory arrangements for EU and third-country CCPs under EMIR. Whilst the text of EMIR 2.2 has not been finalised yet and it is therefore too early to say what its impact on the derivatives industry will be, FIA supports the European Commission’s desire to enhance regulatory oversight to maintain stable markets, especially given the importance of central clearing to the economy. We appreciate that this proposal builds on the successful equivalence framework in place today, while considering enhanced standards for systemically important clearinghouses. Although the proposal includes significant limits under which a clearinghouse would be required to relocate, we remain concerned about potential market disruption should any forced relocation occur. It is our view that forced relocation would fragment markets, diminish the risk-reducing benefits of portfolio margining, harm liquidity, and ultimately increase costs for end users.