The Commission timetable follows the first meeting of a working group composed of industry representatives and regulators charged with finding a way to reduce risk and increase transparency in the multi-trillion dollar over-the-counter derivatives markets.

Participants at the meeting agreed that technical work would proceed in subgroups to deal with issues such as which CDS-types would be cleared by when, which standards should apply to central clearing counterpaties to ensure their robustness, how to ensure coherence with work taking place in the United States, how to deal with price reporting, and how to ensure adequate information and supervision by regulators.

The initiative mirrors efforts in the US, where the Federal Reserve has been co-ordinating with the Securities and Exchange Commission and other industry bodies to promote the swift creation of one or more central counterparties for credit default swaps.

The European Commission is keen to oversee the development of a complementary counterparty to cater for OTC markets in Europe.

Charlie McCreevy, European commissioner for internal markets says: "At $600 trillion, the size of derivatives markets today are such that we cannot let this OTC market continue without adequate counter party clearing. No one is able to say how these swaps will unwind. Regulators have little sight of potential liabilities that could be building up for individual participants. The opaqueness of these products leads to nasty surprises when things go wrong.

"Regulators need to have a much better view of where the real risks in these instruments lie. That is why I have decided to convene all the main players concerned to work through this. I would like to have by the end of this year concrete proposals as to how the risks from credit derivatives can be mitigated."

Intercontinentaexchange, Nyse Euronext, Eurex and the CME have each submitted plans to develop a CCP for the $60 trillion CDS market.

The EC working party is to reconvene in early December, when it is expected to present a clear roadmap for the creation of a CDS swaps CCP by the end of the year.