Reform of the over-the-counter (OTC) derivatives markets in the wake of the global financial crisis remains a work in progress, according to a new report from the Financial Stability Board (FSB) published on Friday.
The FSB’s report, which aims to assess the global state of regulatory reform in the post-crisis OTC derivatives market, finds that various jurisdictions are making progress on their reform commitments. However, more needs to be done in certain areas, such as adopting margin requirements for non-centrally cleared derivatives, and eliminating legal barriers to trade reporting and regulators’ access to trade data.
In certain areas, the FSB finds good progress. For example, trade reporting requirements for OTC derivatives and higher capital requirements for non-centrally cleared derivatives are mostly in force, the reports say. In addition, trade reporting requirements covering more than 90% of OTC derivative transactions are in force in 19 out of 24 FSB jurisdictions; they are expected to be in place in 23 of these jurisdictions by the end of 2017.
Furthermore, the majority of FSB jurisdictions have adopted frameworks for determining when standardized OTC derivatives should be centrally cleared, and they have adopted central clearing requirements. And higher capital requirements are largely in force, the reports state.
However, the FSB also finds that “current indications are that a substantial number of jurisdictions will not have margin requirements” in force on the internationally agreed deadlines for these reforms. Only three jurisdictions are expected to meet that deadline.
In addition, the FSB says that platform trading frameworks are “relatively undeveloped in most jurisdictions” and that authorities are facing “a range of implementation challenges.”
A separate FSB report focusing on trade reporting finds that “significant work” remains to remove barriers to the reporting of, and access to, complete OTC derivatives transaction information.
“Further significant planning and implementation efforts will be needed in order to meet the agreed June 2018 deadlines,” the report says.
The FSB will continue to monitor and report on the progress toward the implementation of OTC derivatives reform, the report suggests.