Thursday, January 14, 2010

European Derivatives Companies Form Regulatory Lobby Group

Original posted in the Wall Street Journal:

European derivatives exchanges, clearing houses and dealers have set up a lobby group to represent their interests at a time when European policy-makers are drawing up rules set to change the face of trading in this market.

The European Industry Council, which has been formed under the auspices of the London-based Futures and Options Association, will represent these companies' interests in debates on recent regulatory proposals such as a financial transactions tax and limitations in the ownership of clearing houses.

The European Commission is already drawing up rules to encourage banks and their customers to trade standardized over-the-counter derivatives on exchanges and to clear them through clearing houses to reduce the impact of a default by one of their counterparties and to improve transparency in the market.

The commission, for example, plans to increase costs for banks that don't clear derivatives through central clearing houses, by requiring these banks to hold larger amounts of capital against potential losses.

U.S. regulators also plan to encourage more trading and clearing of OTC derivatives but many lobbyists say they aren't taking as hard a line on the issue as European supervisors.

"The current pace of regulatory change is significant," said Anthony Belchambers, chief executive of the FOA. "Many of the recently proposed regulatory developments...will have widespread implications for exchanges and their members alike."

The EIC will initially comprise representatives from exchanges ICE Futures Europe, the London Metal Exchange and NYSE Euronext; European clearing house company LCH.Clearnet; banks Deutsche Bank AG and Morgan Stanley; and brokerage Marex.

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