EU watchdog wants to charge foreign clearing houses

Reuters

By Huw Jones

LONDON, Sept 28 (Reuters) - The European Union's marketswatchdog wants to charge foreign clearing houses seeking to cashin on new derivatives rules being introduced across the28-country bloc, an EU document showed on Saturday.

The move is a sign of how hard-pressed regulators arestruggling to implement on time a welter of reforms called forby world leaders during the financial crisis.

One set of new rules being phased in aims to makederivatives like credit default swaps and interest rate swapssafer after taxpayers were forced to bail out banks in 2008 thatheld large amounts of them.

But the Paris-based European Securities and MarketsAuthority (ESMA), has asked the European Parliament in a letterseen by Reuters if it could levy an undisclosed fee on clearinghouses, also known as central counterparties or CCPs, fromoutside the EU.

Clearers ensure that derivatives and other financialtransactions are completed, even if one side of a deal goesbust, and are core to making the opaque $630 trillion swapsmarket more transparent and safer.

Regulators are forcing banks and others to channel swapstransactions through clearing houses, raising the prospect of abig new revenue stream.

ESMA Chairman Steven Maijoor said in the letter dated Sept.24 that the watchdog will have to vet each foreign clearinghouse that wants to operate in the EU.

But this task will be "much more burdensome than originallyexpected" and with "significant budget implications", the lettersaid.

It had anticipated seven foreign clearers to requestauthorisation during this year and next but the watchdog hasalready received applications from 34 non-EU clearing houses,none of which was named in the letter.

Europe's top EU-based clearers include LCH.Clearnet and Eurex Clearing but are set to face competitionfrom foreign rivals seeking to benefit from the new clearingrequirements now being phased in.

Maijoor said this will involve a "significant amount ofwork", about 45 days per application, or about 7 extra officers.

"European taxpayers should not pay for allowing thirdcountry CCPs to freely offer their services within the EU,"Maijoor said.

"Fees dis-incentivise unsubstantiated applications, that isincomplete, inaccurate and spurious applications."

European clearing houses are generally subject to fees whenthey apply for authorisation abroad, Maijoor added.

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