Brussels, 16/09/2010 (Agence Europe) - Several MEPs have reacted to the European Commission's publication of draft legislation on the derivatives markets and short-selling (see EUROPE 10215). Speaking on behalf of the EPP Group, French MEP Jean-Paul Gauzès said: “These proposals lay the foundations for a necessary regulation. The EPP Group (…) will support these initiatives in the European Parliament.” British Liberal Sharon Bowles commented: “Both of these proposals will immediately put this to the test, above all in the linkage between the Securities Authority and the Banking Authority. An example of this is in the setting of capital requirements for central counterparties, the impact on banking capital of moves that may influence the liquidity of sovereign debt, and the sharing of information that may have systemic relevance.” Bowles is the chair of the EP's economic and monetary affairs committee. She said it was critical that the potential concentration of risk in central clearing chambers (CCPs) be taken into account. On behalf of the Conservative Group, British MEP Kay Swinburne welcomed the measures for encouraging transparency and therefore stability on the derivatives markets: “UK businesses are active users of derivative products, from the large global companies to smaller family owned businesses. We need to work collectively to ensure that future EU regulation does not prevent companies from managing their underlying business risks.”
French Green MEP Pascal Canfin issued a note of caution, commenting that the European Commission had not banned naked short-selling and the Greens would be opposing the draft legislation as “lacking ambition”. He said that if the draft rules were adopted as they are, the short-selling rules would not change the behaviour of the money markets in any way. He did, however, express his support for the draft legislation on derivatives, which matched the scale of the challenges and would ensure that most derivatives trades on organised markets were properly regulated, although the Commission could have gone further and given supervision over the CCPs to the new European Securities Market Authority (ESMA).
EBF. The European Banking Federation reacted constructively: “The EBF welcomes the inclusion of clearing members in a CCP Risk Committee, since they are those who ultimately bear the default risk of a CCP.” It supports the Commission's cautious approach of applying interoperability only to cash instruments. The EBF questions whether imposing a clearing obligation over a class of derivatives, for which no CCP has received clearing authorisation, may contribute to reducing instability in the system. A partial exemption from the clearing obligation for smaller financial counterparties could have been considered. Finally, the Federation is concerned about requirements for potentially higher levels of collateral and capital required for OTC derivative contracts not cleared by a CCP. (M.B./transl.fl)