LONDON Feb 4 European Union regulators have
given the $127 billion daily currency futures market some
breathing space by exempting it from mandatory clearing of
transactions in the 28-country bloc.
The European Securities and Markets Authority (ESMA) is
implementing new rules to make derivatives more transparent and
safer, such as through clearing which uses a third party to
guarantee the completion of a trade even if one side goes bust.
Last year, ESMA held a public consultation on whether
so-called non-deliverable forwards (NDFs), a type of futures
contract in currencies, should be cleared.
NDFs allow investors to take positions in currencies that
are subject to official controls.
The sector told ESMA in its consultation that it wanted a
pause, saying clearing NDFs was in its infancy, the legal
definition of the asset class was not consistent across the EU,
and more convergence in regulation was needed at the global
"ESMA believes that more time is needed to appropriately
address the main concerns raised during the consultation," the
EU watchdog said in a statement.
However, the door will be kept open to requiring clearing at
a later date, it said.
Some trades are already voluntarily cleared through
The Bank for International Settlements (BIS), a global forum
for central banks, said daily turnover of NDFs in London was $60
billion in April 2013, or 36 percent of global trading.
Trading in London is linked to currencies such as the
Brazilian real, the Chinese renminbi and the Indian rupee
The BIS expects the market to continue to grow faster than
the foreign exchange market as long as authorities try to
insulate their domestic financial systems from global market
(Reporting by Huw Jones; Editing by Mark Potter)