By Huw Jones
LONDON, Sept 29 (Reuters) - The trading of privately negotiated derivatives contracts should not be forced onto exchanges, a group of national markets regulators in the European Union said on Tuesday.
The Committee of European Securities Regulators (CESR) advises the EU's executive European Commission on financial rulemaking. It was commenting in its consultation paper on how repositories could make over-the-counter (OTC) derivatives markets less risky.
A repository is a centralised registry that stores a "golden copy" of each transaction so that supervisors can know who is on each side of a trade when things go wrong.
Last year's crash of Lehman Brothers alarmed regulators by highlighting the lack of transparency over who was a counterparty to contracts transacted by the U.S. bank.
Derivatives dealers have begun centrally clearing credit default swaps (CDS) in the United States and EU.
A repository is already operating in the United States for CDS contracts and the 27-nation bloc is looking at how and where contracts traded on EU soil could be stored.
"CESR takes as a preliminary position that the establishment of one or more trade repositories should be market-led," the committee said in a statement.
"It notes that it does not want to impose trading of all credit default swaps, not other OTC instruments in general, on regulated markets," CESR added.
The EU Commission is looking at how it should regulate the derivatives sector and has said repositories would improve efficiency and transparency.
%AD-CONTAINER-0%CESR appears open minded on whether a repository for CDS trades must be located within the EU.
The United States has proposed standardisation of contracts, clearing and exchange trading where possible, putting pressure on the EU to follow suit to the dismay of the industry..
But CESR's position of not wanting to force exchange trading in OTC products echoes comments from the Commission.
An official at the EU executive said last week that forcing trades onto exchanges could create a discrepancy as an EU law introduced in 2007 scrapped exchange monopolies in share trading. She also said a one-size-fits-all approach should be avoided. [ID:nLO208472]
Users say too much standardisation and mandatory exchange trading could threaten the bespoke nature of some contracts.
The Group of 20 leading countries agreed last Friday that all standardised OTC contracts should be traded on exchanges or electronic platforms, where appropriate.
(Reporting by Huw Jones, editing by Ron Askew)