Europe and U.S. Regulators Eye Summer Clearinghouse Deal

U.S. and European regulators are set to come to an agreement on harmonizing rules on derivatives clearing houses by the end of this summer.

Timothy Massad, chairman of the U.S. Commodity Futures Trading Commission, was in Brussels this week to discuss an agreement on recognition of each region’s rules on clearing houses, but failed to do so.

After ending talks on Thursday, a joint statement from Massad and Jonathan Hill, European Commissioner for Financial Stability, Financial Services and Capital Markets Union, said: “Discussions are constructive and progressing. They have been mutually satisfactory on the issue of the ability for both sides to potentially defer to each other’s rules.
Commissioner Hill and Chairman Massad agreed to continue their discussions with the aim of finalizing an approach by the summer.”

Impatience has grown throughout the derivatives industry, in which the transatlantic dispute over clearing poses the risk of significantly disputing markets.

Without recognition, costs for European participants to clear trades through central counterparties (CCPs) in the U.S., such as CME and ICE, would rise substantially.
Part of the disagreement lies in the CFTC using a one day minimum liquidation period, while Europe requires a minimum two day period.

If Europe doesn’t recognise U.S. CCPs by June this year, it will have to delay new capital requirement rules again, as it did in December 2014.