After a painful three years of negotiations and recriminations, the U.S. Commodities Futures Trading Commission (CFTC) and the European Commission (EC) have agreed on a set of policies regulating derivatives trading. The deal has been struck just one day before the expiration of an exemption from some transaction rules for foreign swaps dealers and foreign branches of U.S. banks.

The CFTC was empowered by the Dodd-Frank legislation to regulate foreign swaps dealers and transactions that have a “direct and significant” effect on U.S. commerce. These days that language applies to just about every international banking transaction. And that was a big issue: the CFTC would have enormous power to handcuff the international swaps trade. By the same token, of course, the CFTC could also have decided to loosen its control, but given the financial system’s near meltdown in 2008, that outcome is a bit more difficult to imagine.

In a joint press release issued today, the EC and the CFTC said they have agreed on a “Path Forward” in their “mutual journey to bring transparency and lower risk to the swaps market worldwide.” Considering that the swaps market’s estimated value is around $633 trillion, a little transparency and less risk would be a good thing.

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