Large users of swaps in the US, such as banks, will be required to process trades through clearing houses as the industry is forced to comply with a mandate agreed by the G20.
The clearing houses will be able to apply to run similar operations in Europe under the new rules, which regulators expect will be in place on the continent in over a year’s time.
The sweeping overhaul has provoked deep controversy between regulators, banks and exchanges over the future of derivatives trading. The globalisation of financial markets in recent decades has led to a boom in the use of derivatives, as corporations and banks look to protect themselves against sudden changes in interest rates and bonds. Regulators are pushing for more trades to move on to electronic trading venues and be processed through clearing houses, which guarantee trades between two parties if one defaults.
Europe is further behind the implementation process but key technical standards come into force that will allow clearing houses planning to operate in the European Union a six-month window to apply for authorisation. While clearing houses in Europe already clear derivatives, they do so under an older system of rules
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