(c) 2013, Bloomberg News.
(c) 2013, Bloomberg News.
BRUSSELS — European Union attempts to win exemptions from U.S. rules for swaps trading platforms that take effect Wednesday have been hampered by the partial shutdown of the American government.
Michel Barnier, the EU's financial services chief, was unable to broker a deal with the U.S. Commodity Futures Trading Commission ahead of a budget standoff that's left many government offices shuttered, Chantal Hughes, a spokeswoman for Barnier, said.
"The current situation is clearly problematic, as American rules on Sef registration will enter into force today and we haven't received at this stage meaningful relief for European companies," Hughes said in reference to the U.S. standards on swap-execution facilities, or Sefs. "At technical official level there is no contact at this point in time, but there is contact at more senior political levels," she said. "The CFTC is indeed closed."
The CFTC is overseeing the new platforms as part of an effort required under the 2010 Dodd-Frank Act to bring greater competition and transparency to swaps traded by firms including Goldman Sachs Group Inc., JPMorgan Chase & Co. and Barclays Plc. Largely unregulated trades helped fuel the 2008 credit crisis and led to the $182.5 billion taxpayer-rescue of insurer American International Group Inc.
"We can't of course tell European companies exactly or directly what they should do with respect to the American rules, which are coming into force today," Hughes said. "What I can say is that we at our end will continue to work with the Americans to find a solution on the issue of cross-border swaps."
Gary Gensler, the CFTC's chairman, has held firm on the Oct. 2 deadline for Sefs to register with regulators, while the agency has granted temporary delays related to some other aspects of the swaps rules.
"In practice, we don't expect trading to stop overnight, but the effect is likely be less transparency, liquidity fragmentation and higher funding costs with potential impacts on the real economy," Hughes said.
Barnier wrote to Gensler this week urging the U.S. to delay the registration requirements until March to avoid disruptions in the $633 trillion global market and to give the EU time to complete work on its own legislation.
He told Gensler the EU is concerned that its firms could face overlapping rules that ultimately could lead to a balkanization of financial markets. Hughes said Gensler hasn't yet replied.
Calls to the CFTC today went through to an automated answering service.
A Sef proposed by Bloomberg News parent Bloomberg LP is among venues including those from IntercontinentalExchange, MarketAxess Holdings and Javelin Capital Markets that have won temporary approval from the CFTC, according to the regulator's website.
The CFTC completed rules governing swaps transactions in May. The Oct. 2 deadline is for companies to register with the U.S. as offering Sef services, and in doing so to accept American regulations.