Existing CFTC no-action relief allowing European brokers to execute swaps for US clients is set to expire this Monday. Many expected the relief to be extended over the weekend, but if not, fragmentation of swaps liquidity across borders could expand. The relief was aimed at helping US swaps trading clients and European platforms to mitigate problems arising from the differing pace of regulatory implementation. But the disjointed pace is leading many non-US entities to avoid trading with US counterparties for fear of coming under stricter rules. According to an ISDA study released in January, transactions between European and US dealers in the euro-denominated interest rate swaps market has declined by 77% since the implementation of the CFTC's swap execution facility rules last October.
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