* Regulators to meet in January to agree rules phase-in
* Industry body says more progress on coordination needed
By Huw Jones
LONDON, Dec 4 Derivatives regulators from major
trading centres promised on Tuesday to minimise cross-border
clashes over their new rules to rein in risks in the $640
trillion sector and give industry extra time to adjust.
World leaders agreed in 2009 to increase transparency by
requiring swaps contracts to be recorded, cleared and traded on
electronic platforms by the end of this month, but not all
countries are ready.
The leaders decided on action because most interest rate,
credit default, commodity and other types of swaps are traded
privately among 15 or so top banks like Goldman Sachs,
Deutsche Bank and HSBC.
This makes it hard for regulators to get a full picture when
things go wrong, as with the collapse of U.S. bank Lehman
Brothers in 2008.
The group of regulators from the EU, Australia, Hong Kong,
Brazil, Singapore, Japan, United States, Canada and Switzerland,
met in New York last week. They mapped out, in a statement
released on Tuesday, how they intend to minimise the application
of inconsistent and duplicative rules.
Banks fear having to comply with different rules and there
are already signs some Asian customers are avoiding U.S. banks.
The regulators said in the statement they would consult each
other before deciding if a swap must be cleared, a process
backed by a default fund to minimise fallout from any default.
They pledged to recognise each other's rules and agree on
common phased introductions of the reforms.
"We will consider providing appropriate transitional
implementation periods for entitities in jurisdictions that are
implementing comparable regulations, supervision and
comprehensive oversight," the statement said.
The regulators will meet in Brussels early next year to look
at "options to address identified conflicts, inconsistencies and
They will also tell each other in January when they intend
to start applying the new rules and the transition periods
markets will be given.
As part of the same process of averting duplication
Britain, France, Japan and the European Union in October called
on the United States regulator, the Commodity Futures Trading
Commission (CFTC), to limit the cross-border reach of some of
its new derivatives rules.
The International Swaps and Derivatives Association (ISDA),
the main industry body for the sector, said on Tuesday it
welcomed efforts to align supervisory approaches.
"As the regulatory statement suggests, considerable further
progress needs to be made, and we look forward to engaging
constructively with policymakers towards that end," ISDA said.
One derivatives industry official, speaking on condition of
anonymity, said the statement failed to say what would happen if
a country decides to make clearing mandatory while regulators
The official said the regulators also conceded that
"national authorities would still have ultimate responsibility
and authority to protect against all sources of risk to their
This is seen as offering reassurance to the CFTC, which
faces a Congress leery of the United States being bound by