Derivatives trade body warns new rules will add cost and risk

MOVES to shift the huge market in off-exchange trading of derivatives onto regulated electronic platforms will not make the market safer or more efficient, industry body the International Swaps and Derivatives Association warned yesterday.

Regulators in Europe and the US plan to shift the over-the-counter (OTC) method of trading in derivatives such as credit default swaps onto platforms that make prices public.

US regulator the Commodity Futures Trading Commission believes the change would make the market more transparent, but the ISDA found it could remove choice of where to trade and do little to improve already “extremely competitive” pricing. Such a shift is likely to cost US firms more than $750m to bring in and up to $250m a year to maintain, it said.