* EU presidency to put 10th MiFID compromise to states
* Compromise covers clearing houses, trading venues
* Compromise proposes cap on dark trading in EU
By Huw Jones
LONDON, June 10 EU officials are pressing
Britain, Germany and France to agree a compromise over trading
rules intended to plug gaps exposed by the credit crunch in the
$630 trillion market for derivatives and other specialised
Such financial products have largely been traded
off-exchange in bargains between individual banks, which means a
lack of visibility to regulators of where risks could be
Off-exchange trades also create risk in the financial system
because they lack the guarantees which back trades on an
exchange, which are underwritten by a clearing house whose role
is partly to ensure the trade will be settled even if one side
After nearly two years of attempts to reach agreement among
leading member states on various sticking points, the EU's sense
of urgency has been heightened by moves in the United States,
where regulators last month agreed rules for Swap Execution
"We have been doing this for two years, they are G20
commitments and the U.S. is moving on," an EU diplomat said,
noting the reform is a commitment made in 2009 within the G20
group of leading nations.
An update to the European Union's markets rules, dubbed
MiFID II, was proposed nearly two years ago, but divides the
bloc's members. EU president Ireland will put its 10th
compromise to ambassadors on Wednesday.
Failing a deal, it will put its suggestions to finance
ministers next week, who must debate the rules in public.
"The presidency considers that a delicate balance has been
reached across the main issues and in relation to the text as a
whole," a presidency document for Wednesday's meeting said.
"If agreement at council is to be reached, this will mean
all delegations will be required to accept some difficult
compromises," the document obtained by Reuters added.
The compromise is effectively an attempt to bring Britain,
Germany and France on board for others to fall behind.
The rules implement a pledge by G20 world leaders in 2009 to
make interest rate and other swaps transacted largely among
banks more transparent by trading them on electronic platforms.
The EU law originally proposed "open access" so clearing
houses can clear trades executed on any venue.
Germany has opposed this for exchange-traded derivatives, as
it could be negative for Deutsche Boerse AG, whose
Eurex unit trades and clears large chunks of European exchange
Britain backs more competition in swaps and on-exchange
derivatives to give investors choice as they face mandatory
clearing for their trades. It also sees open access as a "quid
pro quo" for having to accept a planned cap on banker bonuses.
To bring the two countries closer, the presidency has
proposed a review by regulators on the need for excluding
exchange derivatives from "open access" for up to three years.
There are also splits among EU states over how much "dark"
or off-exchange trading in shares should be allowed, and if
there can be own or proprietary trading on new Organised Trading
Facilities (OTFs), the EU's answer to SEFs.
Ireland proposes a 4 percent cap on dark trading per
platform and an 8 percent overall EU cap, lower than foreseen in
a bid to persuade France to back a broad deal. Dark trading
currently accounts for 4 percent of trading, diplomats say.
"The proposed double volume cap ... sends a clear message
that the EU is leading the way in severely limiting dark pool
trading," the presidency document said.
Proprietary trading, seen by critics as banks betting on
price moves, could only be allowed on an OTF to help complete
orders in illiquid sovereign debt, Ireland proposed.
Agreement on Wednesday and endorsed by finance ministers
would open negotiations with the European Parliament on a final
text that would become law next year at the earliest.