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LONDON, Feb 23 (Reuters) - Regulators across the European Union can use some discretion in how they will enforce a new derivatives market rule from March 1 as long as firms show they are making an effort to comply, the bloc's securities watchdog said on Thursday.
From March 1, users of swaps or privately traded derivatives contracts to hedge against interest rate or currency risks, must post a "variation margin" or collateral to cover day-to-day moves in market prices and ensure there is enough cash to cover losses.
The industry, however, has warned that many market users won't be ready in time, given the amount of paperwork needed.
The EU's European Securities and Markets Authority (ESMA) said it has been made aware of the "operational challenges" in meeting the March 1 deadline.
Regulators could take into account the size of exposures in swaps contracts and default risk when going about their day-to-day enforcement work, ESMA said in a statement on Thursday.
"This approach does not entail a general forbearance, but a case-by-case assessment from the competent authorities on the degree of compliance and progress," it added.
Reporting by Huw Jones; editing by Jason Neely