Cross-Border Swaps Deal to End U.S.-EU Regulation Overlap

Accord breaks deadlock over whether the CFTC can impose its rules on trades booked in Europe.

U.S. and European Union (EU) financial regulators took a step toward bringing derivatives trading under an integrated framework of global regulation designed to reduce risks in the $633 trillion swaps market.

The accord, announced jointly yesterday in Washington and Brussels by the EU and the U.S. Commodity Futures Trading Commission (CFTC), broke a deadlock over whether the U.S. could impose its rules on trades booked in Europe. Banks and other swaps traders said the deal reduces the chance they will be forced to comply with conflicting regulatory regimes.

AIG Lessons

Global regulators sought to bolster oversight of the swaps market after largely unregulated trades helped fuel the 2008 credit crisis and led to the rescue of American International Group Inc. (AIG), a U.S.-based insurer that booked large amounts of swaps trades in Europe.

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