EU proposed using clearinghouses for over-the-counter derivatives and push for studying the shifting of more trades to exchanges. EU further considers the creation of data warehouse in order to boost transparency of trades as well as to promote standardized contracts. Though UK supports moves for greater standardization, it argues that there should be more flexibility. It approved of clearinghouses but it does not approve of the coerced use of standardized contracts for trades. If EU’s efforts to cut risk and improve transparency won’t work, UK will introduce reporting requirements for derivative trades. Accounting theory issue:The accounting issues here are whether there should be standardized contracts for all trades and whether there should be reporting requirements for derivatives.
EU’s proposals include the promotion of standardized contracts so as to cut risk. UK disapproves of having coerced standardized contracts for all trades. It pushes for more flexibility and for the introduction of reporting requirements for derivatives in case EU’s attempts to cut risk and improve transparency would be unsuccessful.