EU, United States, strike accord on derivatives regulation

July 11, 2013 at 5:28 PM
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BRUSSELS, July 11 (UPI) -- U.S. and European finance regulators said Thursday they have reached agreement on shared rules for the derivatives market.

The agreement was announced in a joint statement issued by European Union Commissioner Michel Barnier and Chairman of the U.S. Commodity Futures Trading Commission Gary Gensler.

Gensler yielded the most in the negotiations but the deal was closed with just hours to spare before the CFTC's new rules would have forced U.S. traders to follow only U.S. market rules, The EUObserver reported.

The derivatives market is almost 10 times the size of the global economy, valued at an estimated $630 trillion, the EUObserver said.

Derivatives are complex financial instruments based on market wagers that act as insurance against market losses.

While derivative bets are seen as a way to balance out risks on the market, they also contributed to the financial meltdown of 2008, because financial giants, such as American International Group, faced obligations while the market turned sour.

AIG eventually required more than $180 billion in bailout funds to survive the financial crisis.

The agreement announced Thursday matches up rules for bilateral uncleared swaps -- frequently complex derivative contracts that have not been scrutinized by a clearing house -- the newspaper said.

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