European and US regulators reach out to Asia

Derivatives regulators from both sides of the Atlantic have travelled to Asia in an attempt to strengthen ties with regulators in the region.

Derivatives regulators from both sides of the Atlantic have travelled to Asia in an attempt to strengthen ties with regulators in the region.

European and US regulators have been one step ahead of their Asian counterparts in implementing derivatives reforms and are keen to establish cross-border coordination.

Both the European Securities and Markets Association (ESMA) and the Commodity Futures Trading Commission (CFTC) were present at the Asia Financial Forum in Hong Kong this week.

ESMA also signed a Memorandum of Understanding with the Hong Kong Securities and Futures Commission on a European regulation that outlines an approval process for non-EU clearing houses. 

CFTC chairman Timothy Massad is also visiting Beijing, Tokyo and Singapore as part of his Asia trip with a view to work on cross-border harmonisation.

“The United States and Asia are strongly and increasingly intertwined,” said Massad this week. “What we do affects you. What happens here affects us. We are all in this together.”

Europe and the US have struggled to agree on cross-border issues, primarily the mutual recognition of each other’s clearing regimes.

“The Asian economies have grown to the point where well-developed derivatives markets can provide great value,” added Massad.“To achieve that, there must be a regulatory foundation that enables markets to thrive and that attracts participants.

“And because the economies of Asia, the United States, and Europe are so interconnected, we must work together to build a global regulatory framework that achieves those ends.”

In October 2014, ESMA issued first equivalency for regulatory regimes in Hong Kong, along with Japan, Australia and Singapore, while continuing to fail to find common ground with US regulators.

The MoU builds on this, and Steven Maijoor, chair of ESMA, re-emphasised the importance of cooperation.

“Considering the high level of interconnectedness between us, it is imperative that we cooperate on regulation and supervision,” said Maijoor.

“As a reflection of the interconnectedness and complexity of our financial markets, ESMA is working with a large number of Asian regulators on a range of regulatory issues.” 

Maijoor added that the areas of cooperation included the regulation and supervision of credit rating agencies, central counterparties, OTC derivatives, financial reporting, hedge funds and asset management more broadly.

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