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EU sees deal with US over derivatives rules in H1: top official

[HONG KONG] The European Commission expects to reach within six months an agreement with Washington that would allow it to declare US rules for clearing derivatives equivalent to its own, a senior EU official told Reuters.

The two sides are introducing rules to make derivatives such as credit default swaps more transparent after their opacity played a key role in exacerbating the financial crisis that rocked global markets in 2007-09.

Without an agreement on rule equivalence by June, when a grace period expires, EU players using US clearing houses to clear their trades would have to hold extra capital as an insurance against defaults, a costly requirement. "With the US, we are now quite close to an agreement," said Olivier Guersent, director general at the EU Commission's financial services division.

"Discussions have been going on for a long time, they started three years ago. We have made considerable progress but the road was bumpy," said Guersent, who spoke to Reuters on the sidelines of the Asian Financial Forum in Hong Kong. "We are now entering a final stage of negotiations and we should certainly see an agreement in the first half of this year."

Guersent, who reports to Commissioner Jonathan Hill, said the EU's executive had not yet taken a decision on whether to delay the introduction of a separate set of rules aimed at overhauling how securities and commodities are traded in the EU.

European banks, trading firms and investors have asked the Commission to postpone by at least a year the introduction of the new rules, known as MIFID II (Markets in Financial Instruments Directive), as they fear they will not be able to update their IT systems in time.

Steven Maijoor, chair of the EU's European Securities and Markets Authority, told Reuters on Monday he was optimistic the rules would be delayed. "A delay is still to be decided by the Commission," said Guersent. "If decided, it would involve an amendment to primary legislation." "In any case, we will continue the process on the adoption of secondary legislation. Postponement, if there is any, would mainly be due to the need for the industry and supervisors to bring up in line their IT system."