Update

European Regulation

	The Clearing and Settlement Code of Conduct

The FOA has consulted with a number of market infrastructure providers and firms with a view to ascertaining their views on the Commission's proposal to extend the Clearing and Settlement Code of Conduct (currently limited to cash equities) to other asset classes, including listed (and OTC) derivatives. While it is expected that there will be some divergence in views (bearing in mind that market infrastructure providers and firms occupy a different place in the trading process, have different strategic ambitions and will be affected differently by any such extension), there is a clear consensus that, before any decision is made, there should be a pre-analysis. This initial review should cover (i) whether or not there is any evidenced “market failure” justifying extension; (ii) whether it is appropriate to extend a Code which has been designed for cash equities business to derivatives; (iii) whether the differences between cash equities and derivatives are so fundamental that, if a Code is felt appropriate, it should be a new Code rather than just an extension of the existing one.

At the last meeting of the Monitoring Group, the Commission appeared to have accepted the concerns of the industry and the need for the suggested pre-analysis before any decision is made as to the merits or otherwise of extending the Code.

Any member firm wishing to become involved in this process of reviewing the appropriateness of extending the Code should contact Anthony Belchambers, who is looking to set up a small advisory group of practitioners to help formulate the approach and direction of the FOA on this matter.

	The Commission's Commodity Review

The Committee of European Banking Supervisors (CEBS) has published its assessment of the prudential risks arising from the conduct of commodities business and the activities of firms carrying out commodities business. This paper incorporates many of the points raised in the response made by trade associations to the first draft assessment released earlier this year.

	FOA opinions on rights of market access for commodity derivatives trading

The FOA has appointed Simmons & Simmons and Denton Wilde Sapte to produce between them a set of legal opinions which would cover the rights and conditions of market / trading access in commodity derivatives across a number of EU and non-EU jurisdictions identified by member firms.

Work on the opinions for the EU jurisdictions is now complete and those firms which have already subscribed to this section of the project should have been contacted individually.

Details of the project, including particularly a list of “target” jurisdictions and the kind of questions that will be answered in respect of each of those jurisdictions are available on request . If you have any further questions or wish to subscribe to either set of opinions, please contact Simon Andrews

	EU/US Financial Services Regulatory Dialogue

As members will be aware, the FOA initiated, and is providing the Secretariat for, the EU-US Coalition on Financial Regulation (see [website ref]). The main focus of the Coalition is to encourage the development of a more efficient and effective framework of regulation for transatlantic financial services business through the adoption of the following policy “gateways”, namely:

• Regulatory recognition , based on approximation of rules' outputs (and not harmonisation of the rules themselves) to exempt foreign firms from compliance with host state licensing, prudential and business conduct rules

• Exemptive relief for wholesale business

• “Targeted” rules' convergence where harmonisation would be commercially advantageous, reduce business costs, facilitate common internal market-facing and customer-facing practices and procedures and/or simplify rights of market access

At the present moment, there are two current initiatives in this space, namely, that of the Coalition and the work agenda of the Institute of International Finance (IIF) based in Washington. Both the Coalition and the IIF have agreed to work closely together and develop a common agenda, but not to wholly converge their activities on the basis that the IIF is IOSCO-facing, whereas the Coalition is focussing only on the transatlantic dialogue.

The present position is that the Coalition is developing and consulting with firms and member associations of the Coalition on its second report, together with a priority list of rules' convergence “targets”. Drafts are available on request from the FOA.