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Barnier’s one finger salute to Uncle Sam

In an unusually forthright speech yesterday, Michel Barnier stretched the limits of polite diplomatic language, almost explicitly implying that the EU grant of CCP equivalence will be withheld from the US pending the CFTC’s own recognition of the EU’s equivalency.

“I intend to propose shortly that the European Commission adopt ‘equivalence’ decisions that will allow CCPs from five countries outside the EU – Japan, Singapore, Australia, Hong Kong and India – to clear EU derivatives trades… If the CFTC also gives effective equivalence to third country CCPs, deferring to strong and rigorous rules in jurisdictions such as the EU, we will be able to adopt equivalence decisions very soon.”

The EU’s “intransigence” has already been likened to the hostage-taking of American CCPs; it may be truer to say that the ESMA objective approval process has been comprehensively hijacked by politics, and consequently devalued. The short speech makes three references to deference; demanding that the US defer to Europe will likely be seen as outright defiance. Aside from the practical absurdity of delay, raising the ante in this way can only invite retaliation. With relations between the major regulators becoming increasingly polarised, and private frustration turning to public antagonism; while not yet endangered, cross-border transactions are increasingly becoming a species at risk.

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