10/02/2012
By Adam Cadle
All trades in financial derivatives will now be cleared by a central counterparty after an agreement was reached between the European Council and European Parliament yesterday.
During 2011, EU presidencies called for new rules to increase the transparency and safety in derivatives trading in order to reduce the risk of contagion stemming from the derivatives market. The Danish Presidency in particular pushed hard to conclude negotiations.
The new central counterparty will now ensure that both parties involved in a trade will get what they are owed and it will reduce the risk of one party becoming exposed if the other cannot pay.
A financial derivative is a useful instrument for the hedging of risk, particularly when underlying assets change in price. However, up till now, the opaqueness in the market has played a major role in such events as the collapse of Lehman brothers.
Denmark’s minister for business and growth Ole Sohn and its minister for economic affairs and the interior Margrether Vestager said: “The Danish EU Presidency has an ambition to contribute to strengthening financial regulation in the EU. Therefore we welcome the success in concluding an important agreement on the regulation of trading in financial derivatives.
“The rules are a big step towards counteracting future financial crisis.”
Other stories you may find of interest:
Special regime for pensions under new OTC derivatives regulation
New legislation to regulate the trade in derivatives has progressed this week, with a vote by the European Parliament’s Economic Affairs
Institutions unprepared for derivatives regulation
Buy-side institutions face significant gaps in being able to accommodate the derivatives regulatory requirements emerging in Europe and the US, a BNY Mellon survey of institutional investors has revealed
EC takes in-depth look at merger between Deutsche Börse and AG NYSE Euronext
The European Commission has announced it has opened an in-depth investigation into the planned merger between Deutsche Börse AG and NYSE Euronext Inc., after the initial market investigation indicated competition concerns in a number of areas
