Brussels, 07/03/2012 (Agence Europe) - The new EU derivatives regulation intermeshes with the United States Dodd-Frank Act, argued the head of the United States committee on the regulation of derivatives (CFTC), Gary Gensler, in Brussels on Wednesday 7 March 2012, where he met with MEPs, European Commission experts and a handful of reporters. Areas where the two sets of rules coincide include, he said, compulsory settlement for standard derivatives in central clearing houses (CCP), the requirement to report transactions to national registers and rules to reduce the risks inherent in the derivatives markets.
Last month, the European Parliament and the Council of Ministers reached agreement on the draft derivatives regulation (see EUROPE 10551), which will require settlement from 2013 onwards via CCPs for most derivatives currently sold over the counter in full secrecy. The Bank for International Settlements (BIS) says that the face value of this market is over €500 trillion a year! All derivatives deals, whether carried out via CCPs or over-the-counter, will have to be reported to national registers monitored by national and European supervisors.
EU and US derivatives rules are not identical, said Gensler, as they deal with pension funds differently (see EUROPE 10551). He said that the margins to be made on derivatives deals over-the-counter also differ (suggesting OTC accounted for between 10% and 30% of total derivatives deals). In the United States, financial bodies are responsible for this job. Gensler said that if the rules are not aligned, then there was a serious risk of companies shopping around for the best legal system.
Greek CDS. Gensler said that futures and swaps were crucial for averting risk, but rules were required to prevent them being manipulated. He refused to comment on conflicts of interest in the international umbrella group for derivatives players (ISDA), which says that at the current stage, the involvement of private lenders in the Greek write-down would not be a credit event amounting to a partial default and therefore credit default swaps (insurance contracts) would not be redeemable. ISDA members are mainly investment banks and investment funds, which are responsible for paying CDS investors in the event of Greece going bankrupt. (MB/transl.fl)