US measures hinder DME expansion plans

Singapore :  The Dubai Mercantile Exchange (DME) has added its voice to criticism of US efforts to overhaul financial market regulations, saying these are hindering its plans to grow and adapt its business.

The DME is facing delays in launching new contracts and in relaxing its margin calculation rules, as it hasn't been able to receive approval for these changes from the US Commodity Futures Trading Commission, Chief Executive Thomas Leaver said. That permission is needed because trades executed on the DME are cleared through, and guaranteed by, the New York Mercantile Exchange.

The US, with an eye on the financial market turmoil of 2008, in July passed the Dodd-Frank Act which calls on the CFTC and the Securities Exchange Commission to introduce some 160 new or revised trading rules and regulations.

Among complaints about proposed changes is one from Thomas Callahan, NYSE Euronext Liffe's chief executive, who has argued that possible new rules requiring some overseas exchanges to register with US regulators could have "very severe unintended consequences".

As for the DME, which had planned to alter its margin calculation rules in late 2009 and to offer four new swaps and options contracts in early 2010, what is causing problems is the long time that reforms are taking and a lack of clarity on these changes.

Additional funding

Under Dodd-Frank, most of the regulatory changes should be completed within a year, but both the SEC and CFTC have said they need additional funding to complete the task.

"I understand politicians are trying to reform after the financial crisis...but there really haven't been any problems with the commodities market over at least the past three years," Leaver told Dow Jones Newswires.