An international agreement is needed on margin requirements for derivative trades that dont pass through clearinghouses, said Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission.

This is a critical piece of work, and a key issue, Gensler told reporters at a briefing in Brussels. Without it, it will be harder for banks to have their regulators comfortable as to how they operate in other markets.

Global regulators are drafting rules for derivatives markets after largely unregulated transactions helped fuel the 2008 credit crisis. The CFTC and the Securities and Exchange Commission are leading U.S. efforts required under the Dodd-Frank Act, signed into law in 2010.

European Union officials and lawmakers last month brokered a deal on rules to force trading of some over-the-counter derivatives through clearinghouses to safeguard financial markets.

Gensler said EU and U.S. legislation on OTC derivatives aligns well. He also urged the EU regulators to reach a deal to revamp the EUs Markets in Financial Instruments Directive, or Mifid, which seeks to push trading in OTC derivatives onto regulated markets.

Failure to agree on the measures, proposed last year by EU Financial Services Commissioner Michel Barnier, would have a tremendous cost to the European public, Gensler said.

Coordinating margin requirements for uncleared trades is an important additional step, Gensler said, as investors still need to be able to hedge their risks even when the swap they use to do so hasnt been cleared.

Gensler was quizzed by reporters on whether he was concerned about authorities pushing to stop credit-default swap contacts being activated on Greek debt as a result of the countrys bond swap with private investors.

Its really critical that hedgers have the ability to use a contract and know what they are getting, Gensler said, without commenting directly on the Greek situation. As you know, right now there is some debate about that.

Gensler said that the CFTC and the Financial Stability Board would publish proposals to improve the transparency of financial markets in the next few days.

He said the plans would center on assigning so-called legal entity identifiers that would make it clearer who is conducting trades.

The FSB brings together central bankers, regulators and finance ministry officials from the Group of 20 nations.


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