LONDON: The European Union’s markets watchdog wants to charge foreign clearing houses seeking to cash in on new derivatives rules being introduced across the 28-country bloc, an EU document showed yesterday.
The move is a sign of how hard-pressed regulators are struggling to implement on time a welter of reforms called for by world leaders during the financial crisis.
One set of new rules being phased in aims to make derivatives like credit default swaps and interest rate swaps safer after taxpayers were forced to bail out banks in 2008 that held large amounts of them.
But the Paris-based European Securities and Markets Authority (ESMA), has asked the European Parliament in a letter if it could levy an undisclosed fee on clearing houses, also known as central counterparties or CCPs, from outside the EU.
Clearers ensure that derivatives and other financial transactions are completed, even if one side of a deal goes bust, and are core to making the opaque $630 trillion swaps market more transparent and safer. Regulators are forcing banks and others to channel swaps transactions through clearing houses, raising the prospect of a big new revenue stream.
ESMA Chairman Steven Maijoor said in the letter dated September 24 that the watchdog will have to vet each foreign clearing house that wants to operate in the EU.
But this task will be “much more burdensome than originally expected” and with “significant budget implications”, the letter said.
It had anticipated seven foreign clearers to request authorization during this year and next but the watchdog has already received applications from 34 non-EU clearing houses, none of which was named in the letter.
Europe’s top EU-based clearers include LCH.Clearnet and Eurex Clearing but are set to face competition from foreign rivals seeking to benefit from the new clearing requirements now being phased in.