European Financial and Accounting Journal 2011, 6(4):7-19 | DOI: 10.18267/j.efaj.17

Comparing American and European Regulation of Over-the- Counter Derivative Securities

Karel Janda1, Gordon Rausser2
1 Prof. Ing. Karel Janda M. A., Dr., Ph.D. - Professor; Department of Banking and Insurance, Faculty of Finance and Accounting, University of Economics Prague, W. Churchill sq. 4, 130 67 Prague 3, Czech Republic - Professor; Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Opletalova 26, 110 00 Prague 1, Czech Republic - Affiliate Fellow; CERGE-EI, Prague, Politických vězňů, 111 21 Praha 1, Czech Republic; <Karel-Janda@seznam.cz>.
2 Gordon Rausser - Robert Gordon Sproul Distinguished Professor; Department of Agricultural & Resource Economics, College of Natural Resources, University of California, Berkeley, 207 Giannini Hall, California 94720-3310, United States of America; <rausser@berkeley.edu>.

This paper describes the major issues in the clearing of over-the-counter (OTC) derivatives and the current regulative initiatives aimed at removing the market opaqueness. The core of the paper is the comparison of the US Dodd-Frank Wall Street Reform and Consumer Protection Act and the European Market Infrastructure Regulation (EMIR). The similarities and the major differences of these two regulative approaches are emphasized. The major similarities between EMIR and the Dodd-Frank Act relate to the mandatory clearing for standardized contracts, the scope of the derivatives covered, the exemptions from clearing for end-users and the reporting of cleared and uncleared derivative transactions by nearly all financial counterparties. The major differences arise with the restrictions on bank proprietary trading, with separation of derivative trading activities from commercial banking activities, with central counterparties (CCP) ownership rules and with the establishment of mandatory exchange trading requirement.

Keywords: Centralized Clearing, Dodd-Frank, EMIR, OTC Derivatives, Regulation
JEL classification: G01, G28

Published: December 1, 2011  Show citation

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Janda, K., & Rausser, G. (2011). Comparing American and European Regulation of Over-the- Counter Derivative Securities. European Financial and Accounting Journal6(4), 7-19. doi: 10.18267/j.efaj.17
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