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US watchdog urges EU to think carefully about euro clearing changes
May 10, 2017 / 8:03 AM / 4 months ago

US watchdog urges EU to think carefully about euro clearing changes

LONDON, May 10 (Reuters) - The European Union should think carefully before forcing through any changes to where clearing of euro-denominated securities like derivatives and bonds is located after Brexit, the top U.S. derivatives regulator said on Wednesday.

Brussels is looking at whether euro-denominated clearing, an activity dominated by London, should be moved to the single currency area after Britain leaves the bloc in 2019.

Christopher Giancarlo, acting chairman of the U.S. Commodity Futures Trading Commission, told the annual conference of global derivatives industry body ISDA that he was respectful of the fact that “this is an important regulatory policy decision that needs to be made with care by European officials.”

The issue is politically sensitive at a time when Britain and the EU embark on divorce talks, with legislative proposals on clearing due from Brussels next month.

Giancarlo also drew attention to the European Commission’s consideration of a less radical option than moving clearing from London, which would involve tighter supervision of foreign clearing houses that handle large amounts of euro clearing.

A clearing house or central counterparty (CCP) stands between two sides of a trade, ensuring its completion even if one side goes bust.

The CFTC has a lot of experience in the supervision of clearing houses both in the United States and abroad, Giancarlo said.

“We welcome the opportunity to discuss the CFTC’s experience with officials in Europe.”

“To date, the US has not deemed a body of water – even as large as the Atlantic Ocean – as an impediment to effective CCP supervision and examination,” he said.

He also said that given the closeness of the U.S. and European derivatives markets, what Europe decided to do on the supervision of clearing houses “undoubtedly will inform the evolution of US regulatory policy for cross-border swaps clearing.”

Reporting by Huw Jones. Editing by Jane Merriman

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