FSB publishes its ninth progress report on implementation of OTC Derivatives Market Reforms

The Financial Stability Board (FSB) published today its ninth progress report on implementation of OTC derivatives market reforms.

G20 Leaders agreed in 2009 to a comprehensive reform agenda for these markets, to improve transparency, mitigate systemic risk, and protect against market abuse.

To achieve these objectives, the G20 agreed that:

• all OTC derivatives contracts should be reported to trade repositories (TRs);
  
  
• all standardised 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 summary this report  presents the terms of fully operationalising regulatory frameworks: 

• 'Implementation of reforms is most advanced for trade reporting and for higher capital requirements for non-centrally cleared derivatives. 

• There has been further incremental progress to promote central clearing of standardised OTC derivatives: as at end-June 2015, seven jurisdictions are actively assessing their markets against criteria to determine if certain products should be required to be centrally cleared, and five jurisdictions have central clearing requirements in effect for one or more specific product types. Over the next year, further progress is anticipated in many jurisdictions for assessing if certain products should be required to be centrally cleared. 

• Four jurisdictions have regulatory frameworks in place to promote execution of standardised contracts on organised trading platforms; a few other jurisdictions anticipate taking steps in this reform area over the next year, with several jurisdictions noting that current market conditions do not support further steps. 

• Most jurisdictions are only in the early phases of implementing the BCBS–IOSCO framework for margin requirements for non-centrally cleared derivatives (internationally agreed phase-in periods were recently delayed, and now begin in September 2016). 

• Availability and use of trade repositories (TRs) and central counterparties (CCPs) continues to expand, and these infrastructures are most established for credit and interest rate derivatives. Challenges, such as authorities’ ability to access, use and aggregate TR data, persist. 

Authorities continue to note a range of implementation issues, though international workstreams that aim to address most of these issues are underway, including: steps to harmonise transaction reporting and to agree to a framework for uniform trade and product identifiers; further coordinated consideration of CCP resilience, recovery and resolution, and interdependencies; and ongoing multilateral and bilateral discussions to address cross-border regulatory issues (with several additional steps recently taken by authorities in this regard).' 

The FSB will continue to monitor and report on OTC derivatives reform implementation progress, including the effects of OTC derivatives reforms over time. 

OTC Derivatives Market Reforms Ninth Progress Report on Implementation 24 July 2015