US regulator threatens retaliation over EU’s Brexit derivatives plans
A US regulator yesterday warned it will retaliate if the EU pushes ahead with “irresponsible” regulations to let European authorities supervise US clearing houses.
The proposals, which would also limit Canada’s function as a clearing hub, were put into motion after the UK voted for Brexit.
Christopher Giancarlo, chair of the US Commodity Futures Trading Commission (CFTC), said: “In my talks with European authorities, I have asked them to reconsider such an expansive approach.
The US watchdog’s warning comes as British financial regulators attempt to defuse tensions with the EU around the future of clearing euro-denominated financial contracts after Brexit.
“If a satisfactory resolution of this situation cannot be found, the CFTC will have no choice but to consider a range of readily available steps to protect US markets,” said Giancarlo.
He added the CFTC will not allow the firms it regulates to comply with conflicting and overly burdensome regulation from abroad.
The CFTC has “strong and blunt” tools it can deploy unilaterally as a last resort without new legislation, including the withdrawal of the exemptions that allow US market participants to use trading platforms in the EU, he said.
The US watchdog has privately warned European officials that the bloc would suffer far more than the United States in an all-out clearing war because American firms are much larger liquidity providers to European exchanges than the reverse, a person familiar with the discussions told Reuters.
The new rules are expected to win approval in Brussels before the UK leaves the union next year, and will force “systemic” foreign clearing houses operating in the EU to be jointly supervised by European regulators.