A top US regulator would welcome more time to resolve a conflict between the EU with Washington over making derivatives markets safer. The current deadline is Dec. 15 for new capital requirements to kick in, making business with US clearing houses prohibitively expensive for European banks.
The EU is discussing whether to move a deadline by which US clearing houses, which act as go-betweens for buyers and sellers, must meet EU rules when doing business there. "I am encouraged by that flexibility ... it's very important as we deal with this not to disrupt the market," Tim Massad, the head of the Commodity Futures Trading Commission derivatives regulator said.
Some of the US rules for how clearing houses protect customer funds are crucial for the CFTC because they guarantee that clients do not lose their money if a firm goes under, Massad said. But the CFTC could give in where there was "no strong supervisory interest," for instance for non-US clients doing business with these firms in the United States. The CFTC was still considering exempting foreign clearing houses from the US rules, Massad said, but that would only be valid for large banking clients and not for others such as asset managers. That might not go far enough for Europe, according to a recent letter by an industry group.
That rule would not precede a deal with the EU, Massad said. "I think we're more focussed on working out this immediate issue with Europe," he said. The CFTC would also soon seek market input on its plans to extend the number of products that need to be cleared, he said. At the moment four types of interest-rate swaps and two kinds of credit default swaps need clearing. The new products could include interest-rate swaps in other currencies and non-deliverable forwards, he added.
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