Different collateralization requirements for FX derivatives in Europe and the United States could result in regulatory arbitrage, and trades involving these risk management tools present the largest threat to markets, European Securities Markets Authority (ESMA) Chairman Steven Maijoor told FXWeek.

When addressing the European Market Liquidity conference, which was created by the Association for Financial Markets in Europe, Maijoor noted bilateral collateralization laws for affecting FX derivatives would be present in European regulations but not U.S. laws, according to the media outlet.

He then emphasized the importance of uniformity in laws affecting the risk management tools  in order to avoid creating opportunities for regulatory arbitrage, the media outlet reports.

"The real issue for FX derivatives that only a few have spotted is not the clearing obligation, but bilateral [collateralization]. The problem of international inconsistency and regulatory arbitrage is much more serious for margin for contracts that are not centrally cleared," Maijoor stated in London this morning, according to the media outlet.

The ESMA will have to cope with a framework of various regulators including Markets in Financial Instruments Directive and European Markets Infrastructure Reform with a light staff and little resources, Risk Magazine reports.