Global Derivatives Update: ESMA and Clearing, Italy’s Transaction Tax

Global Derivatives Update: ESMA and Clearing, Italy’s Transaction Tax

Derivatives Transaction Tax in Italy

A tax on equity derivatives transactions grew more likely in Italy this week, as the Italian Senate approved a budget containing the seeds of a Financial Transaction Tax (FTT).

The bill was first introduced to Italian parliament in mid-October. In the interim, the Financial Transaction Tax has been changed to emulate a similar bill in France, especially after a wave of pushback from industry players. The final tax rate for financial transactions has yet to be determined, but indications are that the bill will be further watered down.

The Financial Transaction Tax is riding the larger budget in Italy, so its final form will be linked to Italy’s broader financial reforms. The Italian premier, Mario Monti, has said that he will resign when the budget is passed.

ESMA and Clearing in Europe

The European Securities and Markets Authority (ESMA) published a working framework that would improve cross-national clearing in European Union member states. The new framework would make it harder for a clearer to remove itself from a group which already works together, except  under circumstances where doing so would reduce risk.

“The guidelines in principle are a step in the right direction and will help remove commercial barriers to market participants having a choice of where their trades are cleared,” said Diana Chan, chief executive of EuroCCP, according to Reuters.

Currently four closely connected clearers—LCH.Clearnet, EMCF, X-Clear, and EuroCCP—cover 60 percent of all share trades in the EU.

U.S. Congress and Cross-Border Compliance

The U.S. Congress is urging the CFTC to establish workable cross-border compliance rules.

“We are very concerned that a lack of coordination between both foreign and domestic regulators could soon lead to a disruption of the derivatives markets,” 14 members of the House of Representatives, from both parties, said in a letter on Thursday.

As it stands, foreign banks will soon be required to abide by the same rules as U.S. entities, including a counting their transactions toward an $8 billion threshold. Crossing the threshold would lead to increased registration costs and monitoring.

Read more.

About The Author

Felix Shipkevich

Felix Shipkevich

Mr. Shipkevich’s practice focuses on regulatory, transactional, and enforcement matters in the fields of futures, commodities, and derivatives. He works with Futures Commission Merchants (FCMs), Retail Forex Exchange Dealers (RFEDs), Introducing Brokers (IBs), Commodity Pool Operators (CPOs), Commodity Trading Advisors (CTAs), Swap Dealers (SDs), Swap Execution Facilities (SEFs), and domestic and offshore hedge funds. Mr. Shipkevich guides clients on procedures related to registration with the U.S. Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), as well as domestic and international regulators in local jurisdictions. Mr. Shipkevich prepares and helps implement compliance, anti-money laundering (AML), and Electronic Trading Systems (ETS) procedures for clients in the commodities and derivatives fields.

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