FSB published three reports setting out progress on reforms to over-the-counter (OTC) derivatives markets. These reforms are trade reporting of OTC derivatives; central clearing and exchange or electronic platform trading of standardized OTC derivatives; and higher capital and minimum margin requirements for non-centrally cleared derivatives. The three reports look at the effectiveness of these reforms and their broader effects since the crisis; progress in implementation since June 2016; and progress in addressing legal barriers to reporting and accessing OTC derivatives trade data.
The report on review of OTC derivatives market reforms, which will be delivered to the Hamburg G20 Summit, finds that implementation of the reforms is now well-progressed. However, this has taken longer than originally intended due to the scale and complexity of the reforms and other challenges. Implementation is still ongoing and is generally most advanced in the largest OTC derivatives markets. Further effort will be required to finish the job. Further study should be made of the effects of the reforms in protecting against market abuse. Meaningful progress has been made toward mitigating systemic risk and improving transparency, with some authorities reporting use of trade repository data for market surveillance purposes. However, significant challenges remain and it is important to complete work quickly to improve the quality of, and ability to aggregate, trade repository data, including by removing legal barriers to the full reporting and sharing of such data. In addition, cross-border cooperation, including over the timing of implementation, is important to help reduce market fragmentation.
The twelfth progress report on implementation of OTC derivative reforms reports the latest steps taken by jurisdictions since June 2016. Since the last progress report, the number of FSB member jurisdictions with comprehensive margining requirements for non-centrally cleared derivatives increased by 11 to a total of 14. However, 10 jurisdictions still do not have margin requirements in force in accordance with the internationally agreed implementation schedule for these reforms, and these jurisdictions should urgently take steps to implement these reforms. Comprehensive trade reporting requirements for OTC derivatives and higher interim capital requirements for non-centrally cleared derivatives are now mostly in force across member jurisdictions. Since June 2016, progress continued, albeit at a slower pace, in implementing central clearing frameworks, final capital requirements for non-centrally cleared derivatives, and platform trading requirements. The number of central counterparties (CCPs) available to clear OTC derivatives increased to 32 and cross-border availability of CCPs has also increased. Authorization of new trade repositories also continued. FSB, working with standard-setting bodies, will use its new post-implementation evaluation framework (to be published ahead of the July G20 Summit) to assess the interaction of the reforms on incentives to centrally clear OTC derivatives and will publish the results from this work in late-2018.
The progress report on plans by FSB member jurisdictions to address legal barriers to reporting and accessing trade data sets out the steps jurisdictions have taken to meet the agreed deadlines (end-June 2018 for the key commitments) for removing these barriers, following the publication of jurisdictions’ plans in August 2016. The progress report describes a number of significant actions taken by authorities of the EU, France, Singapore, and the U.S. in the last year to address barriers. However, major gaps and issues remain to be addressed across the FSB membership. It is essential that FSB member jurisdictions address the remaining issues by the committed deadlines in 2018. The FSB will continue to monitor progress and will publish, ahead of the G20 Leaders’ Summit in Argentina in 2018, a report on the extent to which member jurisdictions have met their commitments to remove barriers.
Keywords: International, FSB, OTC Derivatives, Regulatory Reforms, Trade Repository, Central Clearing, Securities
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