Deal is struck on global swaps market

Cross-border trading accord to end U.S., EU regulation overlap

Bloomberg News

BRUSSELS — U. S. and European Union financial regulators broke a deadlock over rules for the $633 trillion global swaps market, saying the accord will protect banks from overlapping requirements and additional costs.

Global regulators have sought to bolster oversight of the market after largely unregulated trades helped fuel the 2008 credit crisis and led to the rescue of U.S. insurer American Interna- tional Group Inc., which booked large numbers of swaps trades in Europe.

The U. S. Commodity Futures Trading Commission and European Commission said the deal reached Thursday will allow banks to comply with only one set of standards for at least some aspects of swaps trading, while staving off the threat that EU-based clearinghouses could be cut off from the U.S. market.

“We’ve taken another significant step in our mutual journey to bring transparency and lower risk to the swaps market worldwide,” CFTC chairman Gary Gensler said in a statement with Michel Barnier, the EU’s financial services chief.

The international reach of CFTC swap-trading requirements has been one of the most controversial elements of the U.S. agency’s Dodd-Frank Act rules, prompting opposition from financial companies including Goldman Sachs Group Inc. and Barclays Plc. The CFTC has faced criticism from European and Asian regulators for overreaching their authority.

Under Thursday’s deal, the CFTC agreed to accept some EU rulemaking as “essentially identical” to U.S. standards, which will let companies apply only the rules of the jurisdiction where they are based.

The CFTC has been putting in place new rules required by DoddFrank designed to have most swaps guaranteed at clearinghouses that accept collateral from buyers and sellers to reduce risk. Gensler had proposed that the rules apply to many trades that now are booked outside the U.S.