Differences between US and EU on Derivatives Emerge
The differences center on how regulators are defining new trading platforms for over-the-counter derivatives, ownership of clearing houses that will be used to process such contracts and whether brokers can get access to membership of a clearing house to handle OTC derivatives for customers.
In the US, the Commodity Futures Trading Commission, the futures watchdog, has proposed that new trading platforms called “swap execution facilities” should require participants to request price quotes from multiple participants.
This would limit the ability of dealers that have long controlled the OTC derivatives markets in private, bilateral deals to carry on doing that business as prices would have to be displayed publicly on SEFs, similarly to how prices are displayed on exchanges.
Jill Sommers, a commissioner at the CFTC, said her agency was already “out of step” with proposals on SEFs from the Securities and Exchange Commission, which is also implementing derivatives reforms under the Dodd-Frank act.
“We need to be consistent, not just with the SEC but globally, otherwise we could have enormous regulatory arbitrage,” she told the conference, organized by the Futures Industry Association.
