EU reaches deal on more transparent OTC derivatives trading
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
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
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
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
--Siobhan Hall, email@example.com