Originally appeared in MiFID Monitor
European Commissioner for Internal Market and Services Charlie McCreevy is back on his soapbox this week and he seems to have two particular bees in his bonnet. The first is, of course, the need for an overhaul of the European regulatory landscape to improve what he calls the “patchwork” of domestic supervisory coverage. The second is the lack of progress that has been made towards establishing a European central counterparty (CCP) for the credit default swap (CDS) market.
At a conference in Brussels earlier this week, McCreevy explained that previous attempts to tackle market oversight have failed because of domestic regulators’ insular approach to regulation. “In Europe there is now a broad consensus that our supervisory systems have not been and are not up to the mark,” he said.
McCreevy has also for some months been grandstanding the importance of a Europe-based CCP, in order to prevent the risk associated with these OTC derivatives being concentrated in the US market. There are also concerns from the Commission that European regulators would be at a disadvantage dealing with an entity out of their jurisdiction.
According to McCreevy these negotiations are continuing with industry participants including exchanges, clearers and broker-dealers. “There is still time to have further talks,” he told the conference.
Thus far, the broker-dealer community has failed to commit to the endeavour to establish a CCP by the second half of this year. Industry associations including the International Swaps and Derivatives Association (ISDA) and the Futures and Options Association have both spoken out against a European solution in favour of a “global” option.
McCreevy stated that legislation may be the only option: “Given the inadequate industry response so far I am keeping open the option of legislating.”