European Union Trying Again to Reach Deal on Overhauling Trading Rules

By Hakim, Danny | International New York Times, January 15, 2014 | Go to article overview

European Union Trying Again to Reach Deal on Overhauling Trading Rules


Hakim, Danny, International New York Times


Negotiators are trying for what could be a last-ditch effort on how to rein in the trading of derivatives and other complex instruments.

Faced with intense lobbying from the oil and commodity industries, the European Union planned what could be a last-ditch effort on Tuesday to reach agreement on one of the biggest issues to come out of the 2008 financial crisis: how to rein in the trading of derivatives and other complex instruments.

The goal was to bring greater transparency to the market in sometimes opaque or exotic securities and reduce the risk of the sort of unexpected calamities that brought the global financial market to its knees.

A meeting of European Union officials on Tuesday was to be the first since talks unraveled last month, leading to an unusual flurry of sometimes caustic posts on Twitter among the participants. If new rules are not adopted soon, the whole process could be set aside as the Union prepares for its spring parliamentary elections, after which any unfinished business would have to be taken up anew.

"It will either get done, or it will get abandoned," Sharon Bowles, a blunt-spoken British lawmaker who leads the European Parliament's Economic and Monetary Affairs Committee, said in an interview.

The difficulty of the negotiations has shown that Europe is having many of the same problems the United States had in erecting a firewall against future financial crises -- but with an even slower and more cumbersome political process. The proposed overhaul stems from commitments made by the Group of 20 major economies after the financial crisis, and many similar measures have already been put in place by United States lawmakers and regulators.

The negotiations in Europe are also unfolding months -- and in some cases years -- after regulators in Washington completed their own set of parallel rules under the Dodd-Frank Act of 2010.

The European authorities and Washington regulators have clashed over just how far to go in overhauling financial regulations. The Commodity Futures Trading Commission, the main United States regulator that oversees derivatives trading on Wall Street, has adopted a plan to regulate European branches and affiliates of American banks if the European Union's rules are not "comparable" to and as "comprehensive" as its own.

Several rules are at issue in the Brussels talks. But the main one is known as the Market in Financial Instruments Directive, whose scope would reach well beyond the financial sector.

Many big corporations outside the financial sector use derivatives to hedge their risks, which is among the reasons a wide range of companies -- including the cosmetics giant L'Oreal, the news and information provider Thomson Reuters and the oil giant Exxon Mobil -- have voiced concerns about how the proposed rules could impinge on their operations. …

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