Segmented Derivative Regulation to Create “Chaos” in the Market

European-Commission

According to Reuters, a lack of congruency between US and EU over how to police the $640 trillion dollar derivative market is causing frustration within Asian Pacific markets, and could lead to serious and expensive consequences.

While reaching an agreed upon solution for derivative regulation is on everyone’s to do list, one of the major difficulties seems to be with how quickly the US decided to begin implementing their laws compared to the EU. News spread of a Transatlantic Trade and Investment Partnership being discussed between the CFTC and the EU back in July. But the CFTC has since quickly jumped ahead of the EU in implementing laws that are now disrupting foreign regulators and traders alike.

The CFTC has actually recently come under fire for its seemingly haphazard rulemaking, recently being sued by several banking organizations because of it.

Regardless of the outcome, banks are worried that if derivative regulation is not agreed upon soon, markets may begin to split, and any added costs caused by this division may be pushed onto end users.

Industry leaders are also warning that a lack of congruency in derivative regulation is causing uncertainty within Asian Pacific markets and that this may cause countries like China and Indonesia to begin to go their own way.