CFTC REPORTS OTC DERIVATIVES REGULATORS ISSUES REPORT TO G-20

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

OTC Derivatives Regulators Issue Report to the G20

Washington, DC — The Over-the-Counter (OTC) Derivatives Regulators Group (ODRG), which is made up of authorities with responsibility for the regulation of OTC derivatives markets in Australia, Brazil, the European Union, Hong Kong, Japan, Ontario, Quebec, Singapore, Switzerland, and the United States, issued a report today that provides an update to the G20 on further progress in resolving OTC derivatives cross-border implementation issues and identifies a cross-border issue that may call for legislative change.

The ODRG provided an update regarding two areas in which it is working to develop approaches to address cross-border issues: (i) potential gaps and duplications in the treatment of branches and affiliates; and (ii) treatment of organized trading platforms and implementation of the G20 trading commitment.

The report also addressed four areas in which it was working to implement understandings reached previously: (i) equivalence and substituted compliance; (ii) clearing determinations; (iii) risk mitigation techniques for non-centrally cleared derivatives transactions (margin); and (iv) data in trade repositories and barriers to reporting to trade repositories.

The ODRG anticipates that it will submit its next report in preparation for the G20 Leaders Summit in November 2014.

CFTC ANNOUNCES REPORT BY OTC DERIVATIVE REGULATORS TO THE G20

FROM:  U.S. COMMODITY FUTURES EXCHANGE COMMISSION,
OTC Derivatives Regulators Issue Report to the G20

Washington, DC – Today, authorities with responsibility for the regulation of over-the-counter (OTC) derivatives markets in Australia, Brazil, the European Union, Hong Kong, Japan, Ontario, Quebec, Singapore, Switzerland and the United States issued a report regarding common understandings to improve the cross-border implementation of OTC derivatives reforms.  This report responds to an April 2013 request by the G20 Finance Ministers and Central Bank Governors, urging key OTC regulators to intensify their efforts to address and resolve remaining cross-border conflicts, inconsistencies, gaps and duplicative requirements by the St. Petersburg Summit, which will take place on September 5-6, 2013.

The report reflects a number of substantive understandings to improve the cross-border implementation of OTC derivatives reforms, including the following:

• Early and comprehensive consultation among relevant authorities when equivalence or substituted compliance assessments are being undertaken is essential.

• A flexible, outcomes-based approach should form the basis of final assessments regarding equivalence or substituted compliance assessments.

• A “stricter-rule” approach would apply to address gaps in mandatory trading or clearing obligations.

• Authorities have a framework for consultation on mandatory clearing determinations.

• Jurisdictions should remove barriers (1) to reporting to trade repositories by market participants and (2) to access to trade repository data by authorities.

• There should be appropriate transitional measures and a reasonable but limited transition period for foreign entities to implement OTC derivatives reforms.

The report also recognizes that challenges will continue to arise in the implementation of OTC derivatives reforms and presents a number of additional topics for further discussion, including authorities’ direct access to registrant information and the treatment of foreign bank branches and guaranteed subsidiaries.

Finally, the report recognizes that open communication is vital to ensure there is common understanding of each jurisdiction’s processes and timelines to implement OTC derivatives reforms, and that flexibility in the application of cross-border regulation will be needed to make progress toward cross-border consistency.