A New Law for Derivatives Markets and the Use of Smart Contracts
By Omar Bairan
General Counsel, Banco Santa Cruz
The objective of this chapter is to highlight general concepts of applicable regulations in relevant financial derivatives markets and how the use of smart derivatives through distributed ledger technology (e.g. blockchain) can be beneficial to, or useful for, derivatives market participants to automate deal execution and, at the same time, comply with such regulations. The content of this chapter is not exhaustive and it does not constitute a legal opinion.
Regulation of the Financial Derivatives Market in the European Union
In November 2007, the Markets in Financial Instruments Directive (2004/39/EC) (MiFID) entered into effect in the European Union (EU). The objective of MiFID was to improve the competitiveness of financial markets in the EU through the creation of a single market for investment services and activities, seeking to ensure investor protection.
MiFID included important changes in areas such as conduct of business, market organization and market transparency. Regulation (EU) No. 648/2012, European Market Infrastructure Regulation (EMIR), refers to “over-the-counter” (OTC) derivatives, central counterparties and trade repositories. The objective of EMIR was to stabilize European markets through the requirement of stricter reporting obligations and a greater standardization of OTC derivatives.
EMIR requires the reporting of information for exchange-traded ...
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