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UPDATE 1-U.S., EU reach preliminary deal on swaps trading under MiFID II
October 13, 2017 / 4:05 PM / 2 months ago

UPDATE 1-U.S., EU reach preliminary deal on swaps trading under MiFID II

* EU says working with SEC on stock rules recognition

* CFTC confident of resolving remaining issues by Jan (Adds news conference)

By Michelle Price

WASHINGTON, Oct 13 (Reuters) - U.S. and European regulators said they had reached a preliminary deal on Friday to recognise each others’ derivatives rules, a critical development that should avert any cross-border trading disruptions.

The deal is expected to be finalised by November, ahead of MiFID II rules which will dramatically overhaul the way stocks, bonds, commodities and derivatives are traded in the EU. Without any equivalence deal, U.S. and European firms would not be able to trade derivatives between the two countries.

The U.S. Commodity Futures Trading Commission (CFTC) and the European Commission (EC) said they had formally committed to treat each others’ rules as equivalent when Europe’s Markets in Financial Instruments Directive II or ‘MiFID II’ rules come into effect in January.

Working together was the best way to ensure stability and resilience while avoiding market fragmentation and over-regulation, said European Commission Vice President Valdis Dombrovskis.

“The commitment you see here today is a commitment to see this through to the end. I am confident we will resolve the remaining issues and finalise this before the January 3rd deadline,” CFTC Chairman Christopher Giancarlo told reporters at a briefing in Washington.

On Friday, the two regulators also said they had agreed to recognise each others’ rules for the treatment of collateral posted against swaps that are not processed by clearing houses. The deal means U.S. and EU firms can trade swaps in each others’ markets but comply with their home rules, reducing regulatory duplication and trading costs.

“The announcement on trading and margin equivalence by the EC and CFTC is a very positive and important step forward in efforts to ensure robust and liquid global markets that enable firms to efficiently manage their risks through derivatives,” said Scott O‘Malia, chief executive of global derivatives industry body ISDA.

But Friday’s agreement did not cover mutual acceptance of stock market rules, a step industry said is also crucial to avoid market disruption when MiFID II comes into force.

Dombrovskis said at the Washington briefing that the EU and United States were working in an “open and cooperative” spirit on remaining issues like stock markets with the U.S. Securities and Exchange Commission.

“We are confident also to resolve all remaining issues,” Dombrovskis said. (Additional reporting by Huw Jones in London, editing by Elaine Hardcastle)

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