Although there is still time before European Commission proposals on over-the-counter derivatives become law, market participants are already considering how the legislation will affect them and where investment might be needed to update technology.

From a clearing point of view, both buyside and sellside firms are looking at what it will take to clear OTC derivatives through a central counterparty, as will be required by the new legislation for standardised contracts. One of the principal issues will be that of connectivity. Firms will need to connect to CCPs to transfer bilaterally negotiated OTC contracts for clearing, to post margin on a daily basis, and also to mark to market.