She also said that policymakers aim at regulation all derivatives. In the US the Dodd Frank bill has left what to do up to the Treasury - actually a signal of how difficult it is to deal with this, how necessary it is to stay flexible, and how crucial it is to trade. In Europe it should be recognised those same factors. On the plus side both the European Parliament and Commissioner Barnier have repeatedly said EU must join up with the US.
Politically, she sees that a compromise around a maturity based option is attractive, the problem then becomes where to stick the pin.
Looking at the maturity profile of FX derivatives for 2007 daily traded volume showed 98% of FX forward and 99% of FX swaps had maturities of less than 1 year, so that must look an attractive place for the pin. However it would then immediately impact on big infrastructure projects for example and it raises the question of whether having a clearing infrastructure for a small part of the market is sensible, it would certainly be costly and no doubt in some quarters determined to have clearing would itself become the raison d'être to lower the time of any maturity exemption. That should be avoided because this certainly would not be treating the right illness.
© European Parliament
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