Monday

6th Apr 2020

Deal sought on delayed EU derivatives law

  • There is still discussion about the exact role of the Paris-based European Securities and Markets Authority (Photo: Travel Aficionado)

Finance ministers meeting in Brussels on Tuesday (24 January) may agree on a compromise deal put forward by the Danish EU presidency on a delayed EU bill regulating trading in derivatives, the sticking point being how much power to give to the responsible new EU authority.

The draft law was initially tabled by the European Commission in 2010, two years after the collapse of Lehman Brothers and the bail-out of AIG - financial institutions which had been at the forefront of 'derivatives' trading, essentially guaranteeing bets on mortgages and loans that went bust once the housing bubble in the US burst.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Once agreed by member states and the European Parliament, the law would make direct trading in derivatives more transparent and traceable, as it would require databases registering every such transaction to be set up in clearing houses that ensure their validity.

MEPs are pushing for the newly appointed EU body, the Paris-based European Securities and Markets Authority (Esma), to have a key role in the process.

London, home to 75 percent of the European derivatives market, has so far opposed Esma being given too many powers, especially when it comes to authorising or rejecting the establishment of clearing houses in a member state - something currently being approved by national authorities.

At a meeting in October, British finance minister George Osborne obtained a concession virtually making it impossible for other countries or Esma to block the establishment of clearing houses in a member state - by requiring unanimity among all except the host country.

Germany, where most of the second type of derivatives - traded through the stock exchange - are taking place, had initially teamed up with Britain but has meanwhile changed course and is pushing for Esma to get a bigger 'mediation' role.

According to a Danish compromise text, seen by EUobserver, the 'unanimity minus one' rule has been kept, but a second option is foreseen so that when a three-quarters majority of states have a negative opinion, they can refer the matter to Esma.

"That decision shall state in writing the full and detailed reasons why the concerned members of the college consider that the requirements of this Regulation or other parts of EU law are not met. In that case the competent authority of the member state where the CCP is established shall defer its decision on the authorisation and await any decision that Esma may take," the text reads.

A meeting scheduled Monday with MEPs dealing with this file has been postponed until the following Monday, pending an agreement among finance ministers.

As for clearing houses themselves, no common position has agreed either. Those acting primarily at a national level - British, German or Italian - prefer the supervision of national authorities "whom they know well", says one market source.

But national authorities can also be politically biased. A Greek authority may reject the application of a Turkish clearing house, whereas Esma would be more "neutral," the source said.

Brussels to tame 'Wild West' derivatives and short-selling

In the latest part of its endeavour to bring an end to the light-touch regulatory climate that produced the economic crisis, the European Commission has proposed a series of rules intending to shine a light on the until-now murky trading in some of the market's more complicated financial practices: derivatives and short-selling.

EU blocks German take-over of US stock exchange

The EU commission has blocked a merger between Deutsche Boerse and the New York Stock Exchange, the two largest players in derivatives - a financial product blamed for the 2008 financial crisis.

No breakthrough at EU budget summit

EU leaders failed to reach agreement on the EU's long-term budget, as richer states and poorer 'cohesion countries' locked horns. The impasse continues over how to fund the Brexit gap.

EU leaders struggling to break budget deadlock

Cuts to innovation, space, neighbourhood and other programme-spending push down the latest budget proposal on the table of EU leaders. Rebates could stay on, to win the support of the net-payers for a deal.

Vietnam sent champagne to MEPs ahead of trade vote

A trade deal with Vietnam sailed through the European Parliament's international trade committee and after its embassy sent MEPs bottles of Moet & Chandon Imperial champagne over Christmas.

Feature

Promises and doubts: Africa's free-trade adventure

The EU is hoping that a continent-wide free trade agreement in Africa will help lift millions out of poverty and help solve issues of security and migration. But its message of values and equal partnership do not resonate with everyone.

Stakeholders' Highlights

  1. UNESDAMaking Europe’s Economy Circular – the time is now
  2. Nordic Council of MinistersScottish parliament seeks closer collaboration with the Nordic Council
  3. UNESDAFrom Linear to Circular – check out UNESDA's new blog
  4. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  5. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  6. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms

Latest News

  1. EU's 'Irini' Libya mission: Europe's Operation Cassandra
  2. Slovak army deployed to quarantine Roma settlements
  3. Lockdown: EU officials lobbied via WhatsApp and Skype
  4. EU: Athens can handle Covid outbreak at Greek camp
  5. New push to kick Orban's party out of centre-right EPP
  6. EU launches €100bn worker support scheme
  7. Court: Three countries broke EU law on migrant relocation
  8. Journalism hit hard by corona crisis

Join EUobserver

Support quality EU news

Join us