ET, the New Alien Scaring Global Markets

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International finance ministers are taking up their concerns with the U.S. finance bosses, Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke.

"At this time of financial market stress, I want to ensure this regulatory dialogue supports cooperation aimed at minimizing any unintended consequences of regulatory reforms on either side of the Atlantic," UK Finance Minister George Osborne wrote to Bernanke late last month.

Japan and Canada also fear that unless non-U.S. firms are exempted from the Volcker rule, trading in their own government bonds would be crimped.

EU financial services chief Michel Barnier is expected to raise the Volcker rule issue with Geithner this month.

To be sure, the EU has its own unmatched aggressive reforms. They include harsh proposals for credit raters, hedge funds, and its MiFID law that would only let non-EU firms do business in the bloc on condition that their home rules are equivalent to EU rules and that they offer reciprocal market access rights.

The unprecedented volume of new rules across the world has made overlaps inevitable but unwinding them may not be easy or so fast.

"Extraterritorial stuff is causing trouble, slowing things down. Many are now waking up to the Volcker rule but it would need Congress to change legislation," said an international regulatory official, who could not speak on the record due to political sensitivities.

David Lawton, acting director of markets at the UK Financial Services Authority, said last week that it would take "years and years and years of analysis" for regulators to determine if regimes are equivalent.

U.S. firms are also chafing at what they see as overly tough domestic derivatives proposals that do not have enough extraterritorial reach to ensure their foreign rivals don't get the upper hand.