The multi-trillion dollar derivatives market will be moved on to exchanges and will have to be cleared by a third party, according to a European Commission proposal to be unveiled today (15 September).
Foreign exchange derivatives contracts will be covered by draft European Union rules due in July to cut market risks but mandatory clearing is unlikely, a senior official from the bloc's executive said on Tuesday.
The European Union may propose rules within weeks to cap the size of individual trades by speculators in derivatives, blamed for exacerbating the economic crisis, said sources with knowledge of the matter.
Lawmakers in Brussels see more cause to pass laws to curb derivatives trading, as the only bank to yield profits during the financial crisis is charged with knowingly reselling shoddy mortgages to benefit a hedge fund counting on their demise.
Business groups and civil society relished the chance to grill the EU's new internal market commissioner, French politician Michel Barnier, at an event in Paris organised by EURACTIV France. Barnier made clear that he was not a fan of self-regulation.
The US is growing increasingly worried by the EU's financial reform agenda, as US officials descend on the European institutions in Brussels to warn policymakers against divergent rules on hedge funds and derivatives.
Instead of addressing fundamental issues like the role of finance, politicians seem stuck in assuaging public anger, argues Sony Kapoor, manager of the international think-tank Re-Define, in an interview with EURACTIV.
Sony Kapoor, a former Lehman Brothers investment banker, spoke to EURACTIV about how politicians' fixation on appeasing public anger over bank bail-outs and bonuses has led to lack of vision in clamping down on banks.
Clearing houses may have to win authorisation from regulators to centrally clear some types of derivatives as part of wider efforts to cut risk in the $450 trillion sector, the European Commission says in a paper prepared for EU member states yesterday (18 January).
The European Commission presented proposals last Friday (3 July) to strengthen the safety of EU derivatives markets, suggesting that dealers in Europe will be given more flexibility than their US counterparts amid mounting pressure for stricter regulation in the aftermath of the financial crisis.
Major banks and brokers involved in the credit default swap industry committed yesterday (19 February) to using EU-based central clearing for their trades, bowing to regulators' pleas to reduce risk in a business that stands accused of worsening the ongoing financial crisis.
The European Parliament is set to adopt new rules in April that will push for the establishment of a single European clearing house for credit derivatives. Lawmakers want to increase checks on such risky financial products, which stand accused of worsening the financial crisis by multiplying victims of insolvencies.
A report by Deutsche Bank Research forecasts that markets for property derivatives – financial instruments with a return based on the value of real estate as an underlying asset – are likely to develop fast in several European countries over the next few years, following the UK's example.