Seven derivatives exchanges operators in Europe have said that law drafts are leading to the underestimation of risks to financial stability. The views are a retort to regulators' recent measures taken to give investors greater choice to trading futures and options.
In Europe plans are coming together to require derivatives clearing houses to inter-link in order to promote competition and bring down the cost of trading. However, the seven exchanges have said that this could undermine market stability and customer protections, and warned that the developments go against European rules and global standards.
The group of exchanges, which includes Deutsche Börse, Intercontinental Exchange (ICE), Euronext, the London Metal Exchange (LME), Bolsas y Mercados Españoles, the Athens Exchange and the ICE-owned Holland Clearing House, issued its concerns at the European Securities and Markets Authority (ESMA).
Acting as counterparties to trades, clearing houses have become a key part of policy makers' methods to safeguard world markets. They have made for an uncomfortable presence in Europe as regulators search to finalise markets rules for transparency, competition and investor protection over the coming months.
Brussels has already decreed that exchanges and clearing houses permit competitors to link up to their venues, but regulators have also allowed operators to prevent access if integration poses any risk to market stability.
Discussion is on going over the exact conditions under which operators would be allowed to shut out rivals. Critics have said that strict conditions would open the doors to a market monopoly.
Clearing houses have their own risk management models and capital buffers. The seven have emphasised that to foster the link up of such houses carries potential risks, and that commercial interests should not distract us from these risks.