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US-EU derivatives dispute may be closer to resolution, says report

A long running disagreement between the EU and the US may be a step closer to be being resolved, as the top US regulator told the Financial Times that he is ready to make concessions after an EU rule change last week. 22 Dec 2015

The European Securities and Markets Authority (ESMA) proposed changes to regulatory technical standards that would reduce the period for which money should be held by a central counterparty in derivatives transactions from two days to one.

In a consultation paper looking at possible changes under the European Markets Infrastructure Regulation (EMIR), ESMA said this would allow European clearing houses to calculate margins in a similar way to their US counterparts, and may help to resolve the on-going debate about the equivalence between the legal and supervisory arrangements for central counterparties in the US and the EU.

The cost to EU banking groups of trading through US clearing houses was set to rise last week  because of this disagreement.

Tim Massad, chairman of the Commodity Futures Trading Commission, believes that the dispute can be resolved before US president Barack Obama steps down in January 2017.

"I am going out on a limb. I don’t normally give any predictions. But since I might not have a job at the end of that presidency, I’m determined to get this done," he told the Financial Times.

The situation should not have gone on for as long as it had, Massad told the Financial Times. He and EU financial services commissioner Jonathan Hill "inherited a certain situation and I think we've established a very good, a very constructive relationship. I think we're both committed to solving this," he said.