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Europeans recoil from the prohibitions


Optionshandel: Der außerbörsliche Handel mit Derivaten wird auf 600 Billionen Euro geschätzt, eine gigantische Grauzone ohne Rechtsrahmen. Quelle: Reuters

Options Trading: The off-exchange trading of derivatives is estimated at 600 billion euros, a huge gray area without a legal framework. Source: Reuters

BRUSSELS. As credit default swaps (CDS), which investors bet without much risk on its own bankruptcy in Greece. Greek Prime Minister Giorgos Papandreou would close the CDS market so happy, he told the Handelsblatt. But the EU Commission is holding a CDS ban dangerous. "It could mean that Greece and other countries to buyers of government bonds have to pay higher interest rates," said a senior official of the EU authority. For the Greeks without CDS, investors could no longer protect bonds against default and therefore would potentially higher risk premiums than it is now required.

Rules for government bonds based on CDS EU Commissioner Barnier will therefore only propose in October. Prior to the General Directorates examine competition, economic and market jointly carefully designed which legislative intervention in the CDS market macroeconomic. "We must be very careful that we do to the real economy, not harm," it said in Brussels.

Gigantic gray area

There is "softer solutions" for CDS as a ban. For example, one could temporarily suspend the business so in situations of crisis, the trading limit for each bank.

Barnier is with great caution not only in the CDS, but also in the regulation of all derivatives of – so that financial products that depend on the development of other markets or products such as commodity prices, exchange rates or equity prices. The global OTC derivatives trading is estimated at 600 billion euros – a gigantic gray area without any legal framework.

The draft EU directive on derivatives delayed again and again. After his inauguration in February Barnier announced first at the draft in June, but now postponed it until September. Previously, the EU Commission wants the banks and other market participants or consult on the issue, to avoid serious errors.

As complicated as well, with respect to regulation of rating agencies, which are related to the crisis in Greece fall again in the crossfire of criticism. The EU complains that the three agencies dominate Standard & Poor’s, Moody’s and Fitch the market. "There is too little competition," said Barnier. A solution to the problem, the EU has not, however, occurred.

Of a new public credit rating agency, as they would like some European parliamentarians, the EU Commission holds nothing. You will now follow the U.S.. There have issuers who want a rating for its new investment to provide the necessary information from June all the rating agencies. This should encourage competition, but is very complicated in implementation. "The U.S. legislation to include only about 100 pages," moans one EU official.

Finally, the EU wants to get on with the regulation of hedge funds and private equity. The draft directive to ‘alternative investment fund managers "(AIFM) after months of tug of war is to take two important EU hurdles. In the marketing committee of the European Parliament last night was the set of rules for voting. The EU Finance Ministers (Ecofin) wants to decide today. So far, the Spanish Ecofin chairman Elena Salgado’s decision in deference to Britain were delayed.

The City of London existential fears harm if hedge funds are fleeing from the new EU rules in third countries. override the British resistance against the finance minister would now, however, said in Brussels.