Small differences in the timing and substance of regulations can mean major money in the swap market, and the flap over the March date shows the continued difficulty regulators have in coordinating oversight and ensuring a level playing field to prevent traders from rushing to do business in the jurisdiction with the laxest rules. The Financial Stability Board, a panel of regulators from around the world, last year called for urgent action by authorities to ensure the market didn't fragment along national lines.

The collateral requirement is one of the bedrocks of global regulatory efforts to curb risk in the market after swaps were blamed by lawmakers for fueling the financial crisis. Authorities around the world pushed for banks, asset managers and other traders to have cash, securities and other collateral for derivatives to protect against the threat that one trader's default could spread risk throughout the financial system.

The international standards were completed at the global level in 2015 and then written into national laws before beginning to take effect. While part of the rule was implemented in certain jurisdictions in September, the March 1 date applies to a much wider range of firms and requires they exchange collateral known as variation margin to cover daily market swings.

'Not Ideal'

For the EU to modify the deadline, it would have to amend the relevant legislation, a process that would take months, the EU official said. There is also no mechanism that would allow the bloc's supervisors to exercise forbearance, the official said.

“There remains a huge amount to be done,” said Emma Dwyer, a partner at Allen & Overy in London. “The scale of documents that still need to be repapered and put in place is very, very high. The chances of it getting done are extremely remote.” The prospect of key jurisdictions departing from the deadline is “not ideal,” she said.

ISDA and other industry groups have referred to March 1 as the “big bang” start date for margin requirements.

“I am especially concerned that smaller firms, including American pension and retirement funds, may not be able to get their documentation done in time,” J. Christopher Giancarlo, acting CFTC chairman, said on Jan. 18. “If they do not, they will be abruptly forced to stop hedging their portfolios at a time of enormous changes in financial rates and global asset values.”

Asset Managers

Giancarlo said that he approved of the policies in Asia to ease the transition and that the CFTC will say more on the matter soon. The CFTC, the main U.S. derivatives regulator, shares power on the rule with other regulators, including the Federal Reserve, that have kept mum so far on the timetable.

Lobbying groups for asset managers and retirement funds say the industry simply isn't ready to meet the March deadline. The asset-management arm of the Securities Industry and Financial Markets Association and the Investment Adviser Association conducted a survey of members that found firms still face a “massive” challenge to rework legal agreements that can cover thousands of client accounts for pensions, hedge funds, private equity firms and other types of investment funds.

“Asset managers, as fiduciaries serving these investors, continue to have concerns about their ability to hedge, manage investment risks, implement investment strategies and achieve best execution on behalf of their clients,” the groups wrote in a Jan. 24 letter to a dozen global regulators.

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