Today, the European Parliament announced that its Economic and Monetary Affairs Committee approved a resolution yesterday calling for strict rules on derivatives trading that would serve to “reduce speculative trading and ensure that as many derivatives as possible are traded through open channels that are subject to standards.” The resolution further advocates imposing higher capital requirements on financial institutions involved in bilateral derivative contracts which are not cleared centrally, and granting regulators the authority to impose trading position limits to offset unsustainable levels of speculation. The Committee proposed additional ways in which to regulate market participants trading in credit default swaps (CDS) and to lessen the burden on corporate end-users of derivatives products who utilize such products for legitimate hedging purposes.
The resolution also directs the European Commission to study ways in which the overall volume of derivatives traded may be reduced. The Committee resolved further to promote the strengthening of central counterparty clearing facilities and fair and equal access to such facilities. With regard to CDS, the resolution stresses that a ban should be placed on speculative CDS trading and that CDS should be cleared through a European central counterparty.