Senior U.S. and European officials met in Brussels in May to discuss the differences in their regulatory regimes for clearinghouses but were unable to reach an agreement on equivalence.
After the meeting, Tim Massad, the chairman of the Commodity Futures Trading Commission, and Jonathan Hill, European Commissioner for Financial Stability, Financial Services and Capital Markets Union, issued a joint statement regarding a possible equivalence decision by the European Commission for clearinghouses that are regulated and supervised by the CFTC. Massad and Hill added that they would continue their discussions with the aim of finalizing an approach by the summer.
"As home to the world's two largest derivatives markets, we are committed to ensuring financial stability by ensuring an appropriate treatment of risks, as well as ensuring market participants can operate cross-border in a global marketplace," the two officials said.
One of the issues that is holding up the equivalence decision is the difference in U.S. and EU approaches to margin methodology. Massad discussed this issue in detail in an appearance before the European Parliament's Committee on Economics on May 6.
Massad revealed the results of a comparison of the two approaches based on actual market data and displayed several charts showing that the U.S. approach generally results in higher margin requirements than the EU's approach, even though the EU approach uses a longer liquidation period.