We’re a long way from Building a Transatlantic Securities Market”, the title of a paper written some years ago by Benn Steil, now at the Council on Foreign Relations in New York, which made the case for cross-Atlantic recognition between markets and regulators. That said, last weeks unveiling of the Obama administrations proposals for US Financial Regulatory Reform certainly brought us a step closer.
Following the announcement, much media attention has been given to the differences in approach to supervision and regulation proposed in the paper versus, say that contained in the ECs paper published a few weeks back. While certain parts of the proposals validate this viewpoint, I have to say that I feel rather encouraged by the commonalities between this paper and current European, and in particular UK, thinking on such matters.
Lets take for example the area of OTC derivatives. Following the publication of the US paper, it now would appear that it is almost universally accepted that the most effective means of achieving transparency and efficiency in the OTC markets is through a central clearing counterparty, with capital charges placed against those products not eligible for central clearing. This very initiative is already underway in Europe with the initiative for central clearing of CDS; with the publication of the US proposals, it now looks highly likely the US will follow suit. Even today, the British government has given its ringing endorsement to such proposals through Paul Myners, the UK Treasury Minister, who voiced support for OTC central clearing, as well capital charges.
Commonality in UK/US thinking can also be found on the subject of hedge funds. The US proposals recommended that hedge fund managers should be registered and authorised by the SEC, a move which follows the current state of play in the UK, where it is the hedge fund managers, rather than the funds themselves, which are registered and monitored by the FSA. All this suggests serious undertones of international co-operation.
During his widely acclaimed speech at Cairo University a few weeks ago, President Obama talked of joining together on behalf of the world we seekcommitting ourselves to asustained effort to find common ground, to focus on the future. While Obama was making reference to creating a better world, free of conflict, this weeks announcement on financial reform would certainly suggest that there is a desire from the US to find common ground in the construction of future supervisory and regulatory infrastructures. Perhaps Benn Steils utopia of a transatlantic securities market isnt as far off as some would have us believe.