Working Group: OTC Derivatives - Summary

The focus of this group was very much the current OTC derivative regulatory proposals being considered in the EU and US and the reservations that some observers had over these. Current legislative proposals in Europe do not greatly differ from US Dodd-Frank proposals. There are some differences such as those on CCPs, but mostly these were not considered to be too substantive. The mood of this group was that regulators were comfortable to head towards convergence around the US measures.

The subject of clearing and CCPs was one of the most contested issues of the group, with many contradictory views on the matter. The questions of whether to make central clearing mandatory was debated at length, with issues such as cost burdens/sharing, fragmentation and the fragility of small businesses all being raised within this discussion.

Open issues which were cited as being important included the future decision on how IOSCO would recommend the shaping an execution facility/trading platform, the impact of Asia on the growth and regulation of derivatives, and the optimal level of collaterisation. In addition, the concentration of risk at the CCP level, and the impact of changes to collateral level by major CCPs on trading prices and liquidity will continue to be topics for further work.