By Tom Braithwaite in New York, Brooke Masters in London and Nikki Tait in Brussels
The global deal to regulate opaque derivatives markets is under strain, according to officials and bankers, amid increased tensions between countries on the shape of the new regime.
Group of 20 leaders struck an agreement in 2009 to force over-the-counter derivatives through central clearing and, where possible, on to electronic exchanges in an attempt to boost transparency and reduce risk in the notoriously shadowy market.
The new rules are supposed to be in place by the end of next year, but there are increasingly fractious disagreements over the detail and timing.
Edouard Vieillefond, managing director in the regulation policy and international affairs division at France?s Autorit? des March?s Financiers, said: ?On 90 per cent of the rules we agree with the US. But if we don?t have the same list of derivatives for central clearing, the same rules for margining and capital including the same capital and collateral requirements for uncleared bilateral derivatives, it won?t be manageable. We need to converge.?
Non-US officials and bankers are becoming frustrated at what they see as an implicit threat from Washington that – absent conformity from Europe – it will demand that the likes of Soci?t? G?n?rale and Deutsche Bank follow American rules worldwide if they want to retain access to US markets.
Gary Gensler, chairman of the Commodity Futures Trading Commission, who is spearheading the US reform effort, said: ?We?re trying to work hand in hand with the Europeans, trying to get similar comprehensive and comparable rules.?
But he added it would be ?far easier to defer to Europe? if European rules matched those already developed in the US. Otherwise banks faced incompatible rules and a costly restructuring.
Mr Vieillefond said: ?By far we would prefer a system based on equivalence and mutual recognition to avoid double or triple regulation. ?There will need to be changes on both sides. The responses really need to be shared.?
Meanwhile, Japanese regulators have asked Washington to slow the pace of its internal rulemaking, according to people familiar with the talks. The request is unlikely to be met.
The trailblazing approach from the US, which passed derivatives reform as part of last year?s Dodd-Frank Act, limits room for compromise. The divided US Congress is also seen as an obstacle.
?Part of the problem is the US rushed out their legislation and now it is in the business of pushing everyone else to follow suit,? said Anthony Belchambers, chief executive of the London-based Futures and Options Association. ?There is a growing sense of agitation.?
Additional reporting by Michiyo Nakamoto in Tokyo
? The Financial Times Limited 2011