New EU rule may curb trading in Asia
LONDON: New European rules may prevent the continent’s investors from buying or selling instruments linked to some of Asia’s best known indices, according to an industry group.
The so-called European Union (EU) benchmarks regulation, which comes into force next month, requires more than 55 non-European gauges, including the Hang Seng Index and Nikkei 225 Index, to register with European authorities.
But even with a two-year grace period allowing registration by 2020, it’s unclear whether this will be achieved, according to a report published by the Asia Securities Industry & Financial Markets Association (Asifma) and law firm Herbert Smith Freehills LLP.
Failure by Asian index administrators to register their products with the world’s biggest economic bloc could mean European investors shy away from the region, said Wayne Arnold, head of policy and regulatory affairs at Asifma. In the longer term, it may see a shift away from some of the traditional indices and into new offerings.
“Banks and investors may be forced to either scramble into benchmarks they believe likely to win EU approval or simply cut back investments in the region,” said Arnold in a joint statement by Asifma and Herbert Smith Freehills yesterday.
The rules aim to create more transparency about how values are set for everything from credit-default swaps to mortgage rates. Failure to comply with the regulation, which covers millions of indices, could mean a fine of as much as two per cent of a parent company’s sales. Bloomberg