European and US regulators should focus on the “issues that matter” in order to resolve the deadlock on cross border derivatives rules, according to Timothy Massad, chairman of the Commodity Futures Trading Commission (CFTC).
Speaking at FIA Europe’s IDX conference in London today, Massad said his recent discussions with European Commissioner Lord Jonathan Hill had been productive and said the US and Europe were close to an agreement.
“We need to think about whether we want to harmonise everything across different jurisdictions, which would take an inordinately long amount of time to achieve, or whether we focus on the issues that matter to financial stability,” he told the audience.
The US and Europe have been at odds since the European Securities and Markets Authority did not include the US in its regulatory equivalence judgements last year and the lack of agreement has led to the CFTC postponing certain aspects of its rules to prevent excessive obstacles to cross-border trading and clearing of derviatives.
He added that a recent meeting with Lord Hill had ironed out one of the key issues of substituted compliance and agreed a framework through which the pair hope to resolve other key issues.
“We’ve narrowed down the other issues we want to agree on by the summer and will do this in a data driven way,” he explained. “Both parties want to resolve this soon and we have committed to not disrupting the markets in the meantime.”
He also explained how the CFTC is “fine-tuning” its existing rules based on industry feedback.
One area which has been requested by the derivatives industry is for the CFTC to play a bigger role in mandating which products are subject to mandatory central clearing rules, something Massad is currently considering.
He also said work with qualified trading platforms in Australia, enabling them to be recognised by US regulators, will help pave the way for similar work in other jurisdictions around the world.
Massad revealed that efforts to improve data collection and reporting on derivatives transactions have been successful with regulators able to access far more information on markets than they had in 2008, but said there was more to be done. With around 24 data repositories operating globally, he said it was essential to foster greater collaboration on data sharing and improve the overall quality of data available to regulators.
Finally, the CFTC is working closely with US bank regulators to finalise proposals for margin requirements on uncleared swaps, focusing on dealers and major institutions while ensuring the rules do not directly apply to commercial end users of swaps.