Competition hots up in EU derivatives market

LONDON, March 28 Thu Mar 28, 2013 1:34pm EDT

LONDON, March 28 (Reuters) - Two U.S. operators are set to go head-to-head in the European Union to record derivatives trades, hoping to cash in on new rules to make markets safer and more transparent.

Atlanta-based IntercontinentalExchange said on Thursday it has applied to EU markets regulator ESMA for approval to operate a trade repository in the 27-country bloc.

Opacity in the $640 trillion global derivatives market alarmed regulators in the 2007-09 financial crisis, prompting them to pass rules requiring trades to be recorded - and open up a new business opportunity.

Repositories will tell regulators who is behind each transaction and show if big risky positions are being built up.

The U.S. Depository Trust & Clearing Corp, which clears trades in the United States and Europe, confirmed on Thursday it too has applied to ESMA to operate a pan-EU repository. It already operates repositories in Britain and the United States.

ESMA had no comment on the ICE and DTCC applications.

Some industry officials caution that having several rival repositories could blur the picture for regulators.

DTCC and ICE face a home-grown rival in Europe, REGIS-TR, a joint venture between Spanish settlement house Iberclear , and Clearstream, part of Deutsche Boerse.

The move by ICE would turn it into an integrated group in Europe - the exchange is buying NYSE Euronext, which owns LIFFE, one of Europe's two main derivatives exchanges. ICE already operates a clearing house in Europe.

ICE said its Trade Vault Europe would offer trade recording in commodities, credit, interest rate and foreign exchange derivatives. DTCC will offer all four and equity derivatives.

ICE Trade Vault became the first U.S. data repository to receive provisional regulatory approval in June last year as it seeks to match moves by DTCC and become a global repository.

"ICE is committed to providing its customers with a global repository solution," said Bruce Tupper, president of ICE Trade Vault.

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