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Lines in the sand

November 5, 2015

By Mary Bogan, Best Execution

Mary Bogan explains the hurdles the US and Europe have to overcome to reach equivalency in clearing.
Right from the start, aligning the clearing regimes of the world’s major economies that govern the global derivatives market looked like a hard ask. Even back in 2009 in Pittsburgh, when G20 leaders still reeled from the financial devastation wrought by obscured derivatives trades, the potential to tilt the playing field and stimulate regulatory arbitrage if different territories used different rules for the newly created over-the-counter (OTC) market, was recognised. Only the most pessimistic though would have guessed that, six years later, a dispute over cross-border OTC clearing rules would still be raging and that the US and Europe would be entrenched in a long-running standoff which is fragmenting the market, damaging liquidity, increasing costs and compliance workloads.

“In the US, CCPs will feel it. In Europe, anyone who currently trades at CME, potentially faces higher costs. But continued disagreement does neither territory any favours.” - Mahesh Muthu, eClerx

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