US end-users are losers in swaps liquidity split

Two-speed reforms in the US and Europe have broken the swap market, participants claim, with US persons being shunned by foreign counterparties that want to avoid Dodd-Frank Act rules. That leaves US firms with a shallower pool of liquidity in some currencies. By Peter Madigan

When the first cracks appeared in over-the-counter derivatives markets about a year ago, they were hairline fractures – whispers of European and Asian banks dodging US swap dealers in order to avoid the same label. As more US Dodd-Frank Act rules took effect and guidance on their cross-border application was finalised, the fractures spread and deepened. Today, many participants view them as physical breaks – separating counterparties and splitting markets – but US firms are the ones feeling the