U.S., EU Take Step Toward Regulating Derivatives

Jul 15 2013 | 11:46am ET

U.S. and European Union financial regulators have taken a step toward regulating the derivatives market by reducing risks in the $633 trillion swaps market through an integrated framework of global regulation.

The two sides reached agreement last week as to whether the U.S. could impose its rules on trades booked in Europe.

Matthew Magidson, partner at Lowenstein Sandler, told FINalternatives the accord was a positive development and showed a change in thinking on the part of the U.S. Commodity and Futures Trading Commission:

“It appears that the CFTC has officially changed its 'go it alone' stance and realized that a broader approach including other regulators will make for a safer and more consistent marketplace. Of utmost importance to U.S. dealers in this agreement, is it appears that non-U.S. branches of U.S. dealers will now be able to act on equal footing with their European counterparts. This change should allow non-U.S. branches to continue to be competitive in Europe and throughout the world.”

Under the deal, the CFTC agreed to accept some EU rule-making as “essentially identical” to U.S. standards, allowing companies to apply only the rules of the jurisdiction in which they are based. The concessions include rules on risk mitigation and how traders should settle disputes over the valuation of derivatives contracts.

The CFTC has issued four decisions easing some rules and deadlines in accord with the joint agreement.


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