The Financial Stability Board (FSB) has published its seventh semi-annual progress reports on implementation of OTC derivatives market reforms, finding that “substantial progress has been made toward meeting the G20 commitments, through international policy development, jurisdictions’ adoption of legislation and regulation, and expansion in the use of market infrastructure.”
In 2009, G20 Leaders agreed to reforms, hoping to improve transparency, mitigate systemic risk, and protect against market abuse, which include that all OTC derivatives contracts should be reported to trade repositories (TRs); all standardized contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties (CCPs); non-centrally cleared contracts should be subject to higher capital requirements and minimum margining requirements should be developed.
In assessing the progress of these reforms, The FSB found that over 75% of member jurisdictions have regulations in place to require transactions to be reported to trade repositories, and the largest derivatives markets have frameworks for central clearing requirements in place, with some specific mandatory clearing rules now in effect, such as for swaps in the U.S. However, the FSB notes that “although legislative frameworks are in place to support increased use of exchanges and trading platforms for OTC derivatives contracts, where appropriate, there continues to be differences across jurisdictions in their approaches and timing of implementation in this reform area.”
The FSB notes that certain cross-border regulatory issues still need to be finalized, and until then, not all reforms can be effectively implemented.
FSB Finds Markets Generally on Track With Derivatives Reform
The Financial Stability Board (FSB) has published its seventh semi-annual progress reports on implementation of OTC derivatives market reforms, finding that "substantial progress has been made toward meeting the G20 commitments, through international policy development, jurisdictions' adoption of legislation and regulation, and expansion in the use of market infrastructure."
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