The Financial Stability Board (FSB) published today its third six-monthly progress report on the implementation of over-the-counter (OTC) derivatives market reforms. The report reviews progress made by international standard-setting bodies, national and regional authorities and market participants towards meeting the commitments made by G20 Leaders at the Pittsburgh 2009 Summit that, by end-2012, all standardised OTC derivative contracts be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties (CCPs); that OTC derivative contracts be reported to trade repositories; and that non-centrally cleared contracts be subject to higher capital requirements.
The report notes that, since the previous FSB progress report in October 2011, encouraging progress has been made in setting international standards, the advancement of national legislation and regulation by a number of jurisdictions; and practical implementation of reforms to market infrastructures and activities. But much remains to be completed by the
end-2012 deadline.
Broadly speaking, the jurisdictions with the largest markets in OTC derivatives - the EU, Japan and the US - are the most advanced in structuring their legislative and regulatory frameworks. They expect to have regulatory frameworks in place by end-2012 and practical implementation within their markets is well underway. Other jurisdictions are generally less
advanced, although progress has been made by many of them, particularly with respect to central clearing and reporting to trade repositories.
One reason for the slower timetables in some jurisdictions has been that authorities had been waiting for the key elements of the regulatory frameworks in the EU, Japan and the US to be finalised before putting their own legislation in place. Some jurisdictions have also sought greater certainty about the application of international principles and safeguards to cross-border financial market infrastructure, so as to make an informed decision about the appropriate form of market infrastructure for their jurisdiction to meet the G20 commitments.
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