Bloomberg News

EU Derivatives Deal May Grant Clearinghouses Trade-Data Access

October 05, 2011

Oct. 5 (Bloomberg) -- Planned European Union rules for derivatives trading may require exchanges and other venues to share some data on trades with rival clearinghouses following an agreement yesterday between governments in the region.

Trading venues would be expected to provide the information “on a non-discriminatory and transparent basis” to clearinghouses, according to a copy of the proposals obtained by Bloomberg News. Exchanges would have to provide “full reasons” for refusing access requests.

The plans stop short of enabling buyers and sellers to use different clearinghouses to complete their derivatives trades. The measures would also allow exchanges to refuse access requests if they posed a threat to the functioning of markets.

European Union finance ministers yesterday reached an accord on derivatives rules that allayed concerns of U.K. Chancellor George Osborne, who had pressed for the scope of the law to go further. The compromise includes an EU declaration that future legislation will increase the role of central clearing.

Clearinghouses such as LCH.Clearnet Group Ltd. and Deutsche Boerse AG’s Eurex Clearing operate as central counterparties for every buy and sell order executed by their members, who post collateral, reducing the threat from a trader’s default.

Yesterday’s deal would cover a broad swath of over-the- counter derivatives, which the EU estimates includes 90 percent of all derivatives trades. Derivatives that don’t meet that definition -- and which aren’t covered by specific exemptions -- will face a central clearing requirement in future legislation. The final version of the rules must be agreed between governments and lawmakers in the European Parliament.

Deutsche Boerse

Deutsche Boerse is one of the firms that would be most affected by the changes. The open-access clause may help its competitors bid for market share.

Joaquin Almunia, the EU’s antitrust commissioner, has said he will ensure that his probe into Deutsche Boerse’s plan to combine with NYSE Euronext will be “very well coordinated” with EU governments and lawmakers working on new derivatives legislation.

Separately, associations representing international banks and fund managers said that the proposals may do too little to prevent clearinghouses from discriminating between trading venues when deciding which transactions to process.

Regulators should ensure that “a clearinghouse must accept instruments for clearing regardless of the venue on which they are traded,” the groups, which include the International Swaps and Derivatives Association and the European Fund and Asset Management Association, said in a letter to Michel Barnier, the EU’s financial services commissioner, dated Sept. 30.

Also, venues should “provide data feeds and other assistance to any clearing house that wants to clear the instrument in question,” the groups said.

--Editors: Peter Chapman, Patrick Henry

To contact the reporters on this story: Rebecca Christie in Luxembourg at Rchristie4@bloomberg.net; Jim Brunsden in Brussels at jbrunsden@bloomberg.net;

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net. James Hertling at jhertling@bloomberg.net


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