* IOSCO official: common supervision of global derivatives
* Asia could go own way if progress on U.S./EU accord slow
* Banks worry that rule clashes will boost compliance costs
By Huw Jones
LONDON, Dec 9 Failure to thrash out a common
supervision of the $640 trillion global financial derivatives
industry will split markets and bump up costs for end users, a
top regulator said on Monday.
Banks who trade interest rate swaps, credit default swaps
and other derivatives are looking to the United States and the
European Union to harmonise their approach to new rules aimed at
making markets more transparent.
Banks worry that rule clashes and overlaps will create legal
uncertainties and extra compliance costs.
David Wright, secretary general of the International
Organization of Securities Commissions (IOSCO), an umbrella
group for regulators from across the world, warned it was a
"recipe for chaos" that could get messy and anti-competitive.
"There is a model here which is a free for all and I think
your costs will go up in a free for all," Wright told a
conference organised by ICI Global, an asset management industry
Wright said slow progress in reaching transatlantic
agreement on derivatives rules could see Asian countries such as
China and Indonesia going their own way.
"We can honestly say there is a growing frustration,
particularly among our Asian Pacific friends about what's
happening," Wright said.
"They are fed up being caught between two elephants."
Martin Wheatley, chief executive of Britain's Financial
Conduct Authority, told the ICI conference that regulators were
committed to avoiding a patchwork quilt of unworkable national
and regional rules.
"There are some significant detailed points to work
through," Wheatley said.
The U.S. Commodity Futures Trading Commission's chairman,
Gary Gensler, due to stand down shortly, has been accused by EU
regulators of trying to impose U.S. rules on them.
Daniel Gallagher, a Republican member of the U.S. Securities
and Exchange Commission, said in Frankfurt on Monday that on his
last visit to Europe, Gensler's name was "like a curse word".
"I've never seen anything like it where one person, one
policymaker in Washington has been singled out by name by
foreign regulators because of an aggressive approach," Gallagher
After the 2007-09 financial crisis, in which derivatives
played a core role in exacerbating uncertainty due to their
opacity, regulators called for trade repositories to be set up
to record transactions for regulators to spot risks.
But Wright said 22 trade repositories have been opened but
the system is not working as they are not connected up.
He reiterated his call for a global enforcer that can
resolve disputes between countries over market rules.
IOSCO, although grouping all top regulators such as the U.S.
Securities and Exchange Commission, Japan's Financial Services
Agency and Germany's BaFin, does not have the power to impose
the market guidance it draws up or resolve disputes.
"At IOSCO we are beginning to think hard about what is
required," Wright said, adding that the body will consult next
year on how it could evolve.
Few believe the United States would accept binding
requirements from a global securities body. Wright, however,
said it would be in the United States' own commercial interests
as markets worldwide move to the U.S. model of market-based
financing while banks focus on building up their capital