Completing the G20 reform agenda for strengthening over-the-counter derivatives markets

Significant progress has been made in developing and implementing the agreed G20 reforms mandating that all transactions in over-the counter (OTC) derivatives be reported to trade repositories and that all standardised contracts be cleared through central counterparties and traded on exchanges or electronic trading platforms, where appropriate. There has also been solid progress in developing the necessary international policies and principles for these infrastructures, including the CPSS-IOSCO “Principles for Financial Market Infrastructures”. In addition, work on establishing the four safeguards for global central clearing is well advanced. Indeed, many jurisdictions have made the required decisions regarding their approach to central clearing. A recent Financial Stability Board (FSB) progress report found that the necessary market infrastructure is inplace for all asset classes of OTC derivatives, but usage of this infrastructure has been slow to expand because of regulatory uncertainties. For example, many FSB jurisdictions have not yet finalised their legislation and rules regarding OTC derivatives. As well, cross-border issues with respect to conflicts, inconsistencies, overlaps and gaps in these rules need to be addressed and resolved. In particular, more work is needed on capital and margin requirements, the definition of standardised, access to data in trade repositories, and compatible formats for data aggregation. While much progress was made in advance of the agreed G20 deadline of end-2012, work has continued into 2013. Despite the extended time frame for full implementation, FSB members remain committed to fulfilling the G20’s vision for efficient and resilient OTC derivatives markets.