Some of the US rules would force some European banks to comply with American and EU rules, a costly undertaking. The bulk of swaps are traded in London and New York and banks say the prospect of rule clashes is already fragmenting markets.
Olivier Guersent, a top official in the European Commission's financial services unit, said the 18-month long talks became blocked until the arrival of Tim Massad as chairman of the US Commodity Futures Trading Commission (CFTC) regulator last year.
"The discussions are going fine and we are suddenly quite close to completing an agreement on this," Guersent told the European Parliament's economic affairs committee. The United States has proposed streamlinining registration requirements for non-US derivatives traders. "It is quite likely we will have further discussions next week," Guersent said, adding that new proposals from the CFTC were "quite encouraging".
As a deal on ironing out differences in derivatives rules nears, a new potential regulatory clash looms over how market benchmarks should be regulated, Guersent said. The EU is approving a law to regulate market benchmarks after banks were fined for attempting to rig currency and interest rate benchmarks.
The United States shows no sign of introducing binding rules and is sticking with implementing globally agreed non-binding principles for the self-regulated sector. Under the draft EU law, investors can only use benchmarks from elsewhere if they are compiled based on rules that are as strict as those in the EU. "They think self regulation is fine and works well. We beg to differ on this," Guersent said. "There is need for a regulatory framework and public intervention in this." The European Parliament is discussing a compromise in a bid to avert European investors being denied the use of US benchmarks.
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