Brussels, 25/05/2011 (Agence Europe) - On Tuesday 24 May, by a wide majority, the European Parliament's economic and monetary affairs committee adopted a draft report by Werner Langen (EPP, Germany) on the draft regulation introducing rules to cover derivatives, a market estimated to be worth more than €400,000 billion a year (see EUROPE 10215). The EP accepts the European Commission's view that the regulation should only cover over-the-counter (OTC) derivatives. The Langen Report may get voted upon by the EP at its July plenary.
The MEPs want the draft regulation to cover all derivatives sold on non-regulated markets, making them use clearing houses, explains Langen in a press release. This idea is opposed by the United Kingdom The City of London, where most European derivatives are traded, wants the regulation also to cover derivatives traded on regulated bourses because it gives the right to select a clearing house. Greater competition for clearing would reduce the power of places closely connected with market and post-market operations
Pension funds will, under certain conditions, be exempt from the clearing obligations. France is strongly opposed to this (see EUROPE 10332). Under certain conditions, non-financial bodies will also be able to trade derivatives OTC but will have to report their deals. Leonardo Domenici (S&D, Italy) said that this gave the guarantee of a flexible approach for commercial and non-financial bodies.
The MEPs say that all derivatives deals must be notified and recorded in trade repositories Greens/EFA MEPs Lamberts and Canfin said the EP had extended the registration requirements to all derivatives so that the regulator would have an overview of exposure to any product.
ESMA. The economic and monetary affairs committee has boosted the role of the European Securities and Markets Authority (ESMA) when it comes to scrutinising clearing houses. It will also be required to ensure that clearing houses do not undermine each other by introducing less strict rules.
Derivatives are financial products whose value is derived from an underlying asset (a share, commodity or mortgage, for example) or a market variable (like interest rates or stock market index). By paying a fixed sum, traders use derivatives to hedge risk by passing it on to others (rather like an insurance contract). (M.B./transl.fl)