EU proposes new rules to regulate derivatives market

22:34, September 15, 2010      

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The European Commission on Wednesday proposed new rules to increase transparency and strengthen the regulation of the derivatives market.

According to the proposal, information on over-the-counter (OTC) derivative contracts should be reported to trade repositories and be accessible to supervisory authorities.

The reporting of OTC derivatives, which are privately negotiated between two counterparts, is currently not mandatory.

The proposal said that the new European Securities and Markets Authority (ESMA) will be responsible for the surveillance of trade repositories and for granting and withdrawing their registration.

Another measure suggested by the Commission is to request standard OTC derivatives contracts be cleared through central counterparties (CCPs), which are entities between the two counterparties to a transaction.

The commission said that CCPs will prevent the situation where a collapse of one market participant causes the collapse of other market participants and put the whole financial system at risk.

"No financial market can afford to remain a Wild West territory. The absence of any regulatory framework for OTC derivatives contributed to the financial crisis and the tremendous consequences we are all suffering from," said Michel Barnier, the European Commissioner for Internal Market and Services.

"So we know who is doing what, and who owes what to whom, as well as taking action so that single failures do not destabilize the whole financial system," he said.

Barnier said the proposal will be presented to the European Parliament and the EU member states for discussion. Once adopted, it will come into force from the end of 2012.

Source: Xinhua

(Editor:李牧(实习))

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