Bloomberg News

EU Reaches Deal on Clearing Law for Over-the-Counter Derivatives

February 09, 2012

Feb. 9 (Bloomberg) -- European Union officials and lawmakers brokered a deal on rules to force trading of some over-the-counter derivatives through clearinghouses to safeguard financial markets.

The deal was reached after negotiations at a meeting in Brussels today, said Chantal Hughes, a spokeswoman for Michel Barnier, the EU’s financial services commissioner.

The rules will empower EU regulators to decide on types of derivatives that should be centrally cleared. Traders that flout the rules would face penalties including fines. The law also sets rules on management of clearinghouses, including on reserves they must hold to protect themselves from insolvency.

Global regulators have sought tougher rules for OTC derivatives following the collapse in 2008 of Lehman Brothers Holdings Inc. and the rescue of American International Group Inc., two of the largest traders in credit-default swaps.

Today’s accord “should give an incentive to seek further alignment of rules not just with the U.S. but also with Asia where the regulatory response has been lagging in some areas,” Richard Reid, research director for the International Centre for Financial Regulation, said in an e-mail.

Rules agreed by the Group of 20 countries include that trades in standard types of derivatives to be logged in databases and passed through clearinghouses.

--Editor: Peter Chapman

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

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.


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