| LONDON, April 17
LONDON, April 17 Foreign exchange dealers won't
face the added cost of having to clear some currency trades if
the European Union decides they must come under new EU rules to
make derivatives markets safer, a top regulator said.
The bloc's executive European Commission is deciding whether
part of the $5.3 trillion a day foreign exchange market should
be legally defined as derivatives under the bloc's laws.
This would trigger new regulatory requirements, such as
mandatory reporting of trades, which began in February.
Steven Maijoor, chairman of the European Securities and
Markets Authority (ESMA), an EU watchdog that is enforcing the
new derivatives rules, said forex trades deemed to be
derivatives would have to be reported.
"But personally, I don't expect there to be any clearing
requirement for forex derivatives in the forseeable future,"
Maijoor told Reuters on Wednesday.
In clearing, a trade is passed through a third party that is
backed by a default fund to ensure completion of the
transaction, even if one side goes bust.
Etay Katz, a financial services lawyer at Allen & Overy,
said it was "good news" on the clearing side, but there would
still be questions about whether forex derivatives would have to
comply with other aspects of the new EU rules.
Some national laws in the EU say that forex contracts which
take several days to settle are derivatives, while in Britain,
the bloc's biggest forex trading hub, such trades are not
Mandatory reporting of derivatives began in mid-February.
"Reporting systems are already done and dusted and dealers
could now have to include another category," Katz said.
Tighter regulation of the currency market is looking more
likely in any case as more than 30 traders have left banks or
been suspended during regulatory probes into whether daily
"fixings" in the largely unregulated market have been rigged.
(Reporting by Huw Jones; Editing by Ruth Pitchford)