Landmark reforms of the derivatives market are in danger of unravelling due to a regulatory battle over the extent of US control, according to bankers, investors and officials.
US regulators had hoped to begin shifting the opaque derivatives market on to electronic exchanges from October 2. The switch to so-called “swap execution facilities”, which is designed to improve financial stability and transparency, is a key part of the regulatory response to the crisis.
According to market participants, however, the move has been complicated by the approach of the US Commodity Futures Trading Commission, which says that any platform – including those based overseas – must follow the American rule book if it trades with a US counterparty. The dispute, which was prompted by an obscure footnote in the US trading platform rules, threatens to unpick a US-EU deal struck this summer that sought to divvy up responsibilities for policing the $633tn derivatives market.