UK victory in derivatives trade war

Earlier this week George Osborne agreed a compromise with European finance ministers over future regulations of derivatives trading.

It was agreed in 2009 by leaders of the G20 group of nations that derivatives, largely traded bilaterally between banks, should be exchanged electronically to mitigate against their risks. The proposals are intended to bring greater transparency to the bulk of derivative contracts – a market valued at €435 trillion a year globally – by requiring their registration.  Trades in over-the-counter (OTC) derivatives, 90 per cent of the market, will have to be reported to trade repositories from 2012 and a new European Securities and Markets Authority will act as the watchdog for repositories.

Earlier this week George Osborne agreed a compromise with European finance ministers over these future regulations of derivatives trading, in a move that saw Britain claim victory in the fight to control its financial markets. Speaking after a ministerial session in Luxembourg that was dominated by the Eurozone crisis, the Chancellor spoke of the Luxembourg deal which: “in effect removes a Eurozone veto [on derivatives trading], making sure trading carries on outside it.”  He told the press that after being outnumbered he felt Britain had: “made significant progress.”

The compromises give Britain more power to block decisions by the future European Financial Services Authority. Under the deal, Britain can be over-ruled only if representatives of all 26 EU states of the future Financial Authority vote against it. Previously, a qualified majority was all that was required.

 

At the summit, ministers looked at ways to support the Eurozone’s banks in the strain from the sovereign debt crisis.  Osborne reiterated Britain’s concern over the failure of the Eurozone countries to convince markets that they have the capacity to tackle the Greek debt crisis and protect the Euro.

 

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