The head of the lobby group representing the world's near $500 trillion derivatives markets has warned that any failure by US and European regulators to recognise each other's rules risks draining the lifeblood of trading: liquidity.

In a speech at the annual International Swaps and Derivatives Association conference in Lisbon, chief executive Scott O'Malia said that the fragmentation created when cooperation between regulators fails can turn liquidity pools into "puddles".