EU hedge rules await thumbs up from CFTC

Michael Bow
Follow Michael
EUROPEAN financial regulators have failed to strike a deal with US watchdog the Commodity Futures Trading Commission (CFTC) over incoming hedge fund rules, just weeks before the new regime is due to come into force.

The European Securities and Markets Authority (Esma), the rule maker for Europe’s financial markets, yesterday said it had inked agreements with 34 watchdogs around the world to clarify how incoming rules on alternative funds will be applied to non-EU funds.

The US Federal Reserve and the Securities and Exchange Commission are among the 34 regulatory bodies to have agreed a memorandum of understanding (MoU) with Esma – which is acting on behalf of all 27 EU states, including the UK.

However agreement has not yet been reached with the CFTC, which regulates Commodity Trading Adviser (CTA) funds, a major player in the hedge fund universe worth around $337bn (£221.3bn) globally.

Failure to reach agreement by the time the rules, called the Alternative Investment Fund Managers Directive, come into force on 22 July may impact the scope of US CTAs to market their funds into Europe.

However, insiders were downplaying the CFTC’s absence from the agreement last night. One said: “It appears more significant than it really is. This is only the first list, another set of MoUs are likely to be signed in the next few weeks.”

Esma hailed the agreements yesterday, called them a “significant step” towards the implementation of the directive in July.

“The agreements set high standards for co-operation on the supervision of cross-border alternative funds, thereby strengthening investor protection and the global consistency of supervision,” Esma chair Steven Maijoor said.

A CFTC spokesman could not be reached in New York last night.