What has US legislation got to do with European MTFs?

A colleague, who is among those closely following new US legislation the “Wall Street Transparency and Accountability Act of 2010,” has drawn my attention to Section 733:  new provisions for regulating electronic swap trading platforms as “Swap Execution Facilities” – similar to EU MTFs. It will apply to US firms and most likely any platform wanting direct access to US users. In many ways this is a good thing. The US currently has no MTF equivalent and this has previously provided difficulty for MTFs trying to access directly US markets as the current no-action regime only applies to regulated markets and not MTFs.

But there are unanswered questions. Is the regulatory regime wider and stricter than the EU? Will it create an arbitrage between the US and European regimes and are there requirements in it which may impact on the commerciality of European platforms if they want to access the US?  We look forward to seeing more regulatory flesh on the bones.

Posted in Exchanges, Rules & Regulation Tagged with: ,
3 comments on “What has US legislation got to do with European MTFs?
  1. I was tracking the the impact of the US regulations on OTC derivatives cleaqring. How big an impact do you think these laws will have moving addtional volume of the derivitives trading to London? (My understanding is that 43% (in that range) of the derivatives contracts are traded in UK today vs 23% in the US).

  2. I thought my comment was going to be spell checked, sorry for my spelling errors in my previous note. Although I am thinking I should sue my University for my inability to spell (and type).


  3. Hugh Simpson says:

    You need to remember that Europe is also in the process of enacting increased regulation of OTC derivatives clearing. The net effect will depend on how market users a s a whole view the relative costs/benefits of the two sets of regulation.

    Potentially if the US legislation is not seen as particularly helpful to the
    market i.e. users are quite happy with the status quo and see the new rules
    as an expensive and unnecessary burden while the European rules are seen as less burdensome, then conceivably the business may shift away from the US. This means the US legislation may backfire. But if the user community welcomes the potential benefits e.g. more transparency,clearing etc then the extra costs may be tolerated and other major jurisdictions, such as Europe, may be forced to raise the regulatory hurdle.

    I think we won’t know the answer until the European legislation has reached its final form.