British chancellor George Osborne backed down on one of his key demands that all derivatives trading be immediately covered by new EU rules but won some smaller concessions on controlling a market once described as the "Wild West".
The new EU rules aim to overhaul an opaque $600 trillion (€426 trillion) market, which boomed in the run-up to the 2008 financial crash, by demanding that deals done off an exchange pass through a so-called clearing house that pools emergency back-up capital.
Crucially, each sale, which in the past has often been recorded by no more than a fax, will be registered centrally for regulators to see.
But the attempt to bring order to a huge market that is largely uncharted by regulators put Germany and Britain at loggerheads, with Berlin pushing for the rules to apply only to those derivatives traded over the counter (OTC) or off-exchange. Britain wanted exchange-traded derivatives also to be channeled through clearing houses.
Most OTC derivatives trading in Europe takes place in London, and Britain is concerned that it would be hardest hit if only those trades were more tightly regulated, while Germany's Deutsche Boerse would stand to benefit.
For Osborne, who interrupted his attendance at the Conservative party's annual conference to make the trip to persuade EU finance minister to change the draft law, the deal allowed him to claim a partial victory.
He won concessions, including one that waters down the power of European regulators to sideline British authorities.
"We came here in a minority," Osborne told journalists, "but through some hard negotiating, we very much improved the directive in the direction that the United Kingdom wanted to see."
In another concession, the European Commission also pledged to reflect Britain's concerns in a new raft of market rules.
Any fresh legislation may also reflect the findings of the European Commission's probe into Deutsche Boerse's merger with the NYSE Euronext .
"When they return to this matter with new legislation, they will also have the benefit of knowing the result of the Commission's investigation into the excessive concentration of market power from Deutsche Boerse and NYSE in derivatives," said Graham Bishop, an expert on European financial policy.
A draft of the new securities trading rules obtained by Reuters showed the EU's executive wants to open up clearing houses for all financial instruments, including on-exchange traded derivatives, to competition.
World leaders (G20) agreed in 2009 that derivatives traded over-the-counter (OTC) or privately among banks should be centrally cleared and reported to a repository by the end of 2012.
These commitments were taken in the wake of the 2008 financial crisis as a way to curb the kind of market volatility that threatened to send the world economy into a second great depression.
The bulk of the world's $600 trillion (€426 trillion) worth of derivatives are traded in
London and New York but while the EU and United States agree on the objectives, detail is taking more time to finalise.
On 15 September 2010, the European Commission tabled a proposal for a regulation on OTC derivatives, central counterparties and trade repositories.
- 14-15 Oct.: G20 ministerial meeting "finance"
- 3-4 Nov.: G20 summit in France (Cannes)