EU agrees new rules to police derivatives market
(BRUSSELS) - EU government and parliament negotiators struck a deal Thursday to impose new rules on the multi-trillion-euro derivatives market, an obscure instrument maligned for helping cause the global financial crisis.
After months of wrangling, the two sides reached an agreement to increase transparency in derivatives trading, forcing all deals to be cleared by a central counterparty standing between buyer and seller.
"The era of opacity and shady deals is over," EU internal markets commissioner Michel Barnier said in a statement.
"With this agreement, we are making a big step for financial stability. And we are substantially reducing the risk of a future financial crisis, with all its consequences on the real economy, growth, jobs and public budgets," he said.
Information on all European derivative transactions, including those traded over the counter (OTC), will be reported to trade repositories.
They will be accessible to supervisory authorities, including the European Securities and Markets Authority (ESMA).
The deal keeps the EU on track to meet commitments made at G20 talks in November on regulating the financial sector.
An agreement was possible after a compromise was reached between governments last month.
Britain wanted national supervisors to decide whether clearinghouses should have permission to operate, but agreed that the ESMA could overrule them if it came up with a two-thirds majority among its voting members.
The City of London is home to three quarters of European trade in these derivatives, and covers half of the global market.
The full EU parliament must approve the deal before it can come into force.
Green group MEP Pascal Canfin welcomed the deal but said it could have been more ambitious.
"The powers of the ESMA are limited," he said. "The British position won by imposing a national veto over a European supervision."
British conservative MEP Kay Swinburne said the deal was "sensible, proportionate and targets the weaknesses in the global derivatives market that were exposed during the financial crisis."
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