April 17, 2015 / 11:36 PM / 4 years ago

Mexico unveils new swaps rules to boost transparency

MEXICO CITY, April 17 (Reuters) - Mexico’s central bank on Friday unveiled new rules aimed at limiting risk in the swaps market, despite concerns the measures could push trades into the United States where such instruments are subject to less oversight.

The Mexican rules are in line with regulation being hammered out by U.S. regulators seeking to boost transparency in the $690 trillion global derivatives market.

Risky derivative trades helped fuel the 2007-2009 financial crisis and led to multi-billion dollar taxpayer bailouts.

According to the new rules, interest rate swaps linked to Mexico’s 28-day interbank equilibrium interest rate will have to be traded on electronic platforms and derivatives exchanges, and transacted through clearing houses.

Banks and brokerages dealing with Mexican institutional investors will be subject to the rules by April of next year, while transactions with such investors abroad will not have to comply until November 2016.

Some Mexican financial regulators say the new oversight risks pushing more local transactions into the United States where the authorities have so far chosen not to apply clearing requirements to peso-denominated interest rate swaps.

A swap is a financial contract in which two parties exchange cash flows on debt, currencies, or other assets, to hedge risk or make a profit. (Reporting by Jean Luis Arce and Alexandra Alper; editing by Diane Craft)

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