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Europe Moves to Cut Risk in $505 Trillion Derivatives Market 

August 10, 2015

Will Hadfield, Bloomberg Business

Banks and investors in the European Union will have to send trades of some interest-rate swaps to a third party under new rules intended to make financial markets safer.

The banks and major investors that hold the derivatives will have to use a third party called a clearinghouse to process their trades, the European Commission, the EU’s executive arm, said in a statement on Thursday.

“There’s been quite a long delay in getting the European Union to the end point in mandatory clearing,” said Emma Dwyer, a partner at law firm Allen & Overy LLP in London. “People should be reasonably content with this. It hasn’t changed the scope of contracts that are covered and the compromises that were worked out along the way have been largely observed.”

The Group of 20 nations in 2009 mandated clearing for many swaps contracts in an attempt to reduce the damage that would be caused by a major financial institution defaulting on its payments.

Read more: Bloomberg Business

 
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