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U.S., EU officials clash over derivatives rules 

May 28, 2015

Huw Jones, Reuters

U.S. and European Union regulators clashed on Wednesday over how to provide solid financial backing for the world's $630 trillion derivatives market and also avoid duplication of rules that would be costly for banks and other players.

The two sides are working on regulations to make derivatives less vulnerable to market shocks like the 2008 financial crisis, but differences over the amount of money needed for margins or collateral to back trades threaten to fragment the market, which is largely traded in New York and London.

Regulators want to avoid these rule differences or else customers could play one jurisdiction against another. But the difficulty in getting agreement between the EU and the United States has held up the process.

In derivatives traded on exchanges, margins are deposited at clearing houses which stand between the buyer and seller. Clearing is becoming mandatory and regulators want these third parties to hold enough cash in case they go bust.

Timothy Massad, chairman of the U.S. Commodity Futures Trading Commission (CFTC), told the European Parliament the U.S. system of margining clients provided better protection by building up a bigger pot of cash.

Read more: Reuters

 
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