Brussels (Platts)--10Feb2012/650 am EST/1150 GMT

Negotiators struck a deal late Thursday on new European Union rules intended to make over-the-counter trading in derivatives, including for commodities like oil, gas and power, safer and more transparent.

The European Commission proposed the draft EU regulation in September 2010 as part of global efforts to increase regulation for OTC derivatives trading.

Negotiators from the European Parliament and the Danish EU presidency, representing the EU's 27 national governments, informally agreed a compromise text Thursday, paving the way for formal approval by the European Parliament as a whole and the EU Council later this year.

"The regulation ensures that information on all European derivative transactions will be reported to trade repositories and be accessible to supervisory authorities, including the European Securities and Markets Authority, to give policy makers and supervisors a clear overview of what is going on in the markets," EU internal markets commissioner Michel Barnier said late Thursday.

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"The era of opacity and shady deals is over," he added.

The trade repositories will have to publish aggregate positions by class of derivatives, "thereby offering market participants a clearer view of the derivatives market," the EP's press office said in a statement.

ESMA will be responsible for monitoring the trade repositories and for granting and withdrawing their registration, said the EP press office.

The regulation also requires all financial firms and non-financial firms, including energy companies, with "large positions in OTC derivatives," to clear standardized OTC derivatives contracts through a central counterparty.

Each central counterparty has to be authorized by its national government, but under certain conditions this authorization could be blocked by other EU governments. ESMA has a role in providing binding mediation in disputes between governments over such authorizations.

Central counterparties from non-EU countries "will be recognized in the EU only if the legal regime of the [non-EU] country in question provides for an effective equivalent system for recognition," the EP press office said.

"However, this does not set a precedent for other legislation on the supervision and oversight of financial market infrastructures," it added.

The EU is currently debating revisions to its markets in financial instruments and market abuse legislation, and Barnier called Thursday for swift agreement on this.

The derivatives deal also requires the EC to report on the impact of the new regulation within three years of its entry into force, the EP press office said.

EU ON TRACK FOR G-20 COMMITMENTS

The EU regulation follows the commitment by leaders of the G-20 group, which includes the world's largest economies, that "all standard OTC derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties by end 2012 at the latest."

The G-20 leaders also agreed that "OTC derivative contracts should be reported to trade repositories and that non-centrally cleared contracts should be subject to higher capital requirements."

"The EU has now ... fulfilled its G-20 commitments in this field, and on time," Barnier said. "I call on all other jurisdictions around the globe, which have not yet done so, to take the appropriate steps to meet our shared G-20 commitments."

--Siobhan Hall, siobhan_hall@platts.com

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