Global securities regulators have published a set of recommendations for regulators on the issue of creating mandatory clearing regimes for over-the-counter derivatives markets.
The technical committee of the International Organization of Securities Commissions published a final report Wednesday setting out recommended requirements for mandatory clearing. The paper outlines IOSCO’s recommendations for regulators to follow in establishing a mandatory clearing regimes for standardised OTC derivatives.
The report was prepared by IOSCO’s Task Force on OTC Derivatives Regulation in order to provide guidance consistent with the Financial Stability Board’s recommendations on implementing OTC derivatives market reforms. The FSB’s report asked IOSCO to coordinate the application of central clearing requirements on a product and participant level, and any exemptions from them, as a means of minimizing the potential for regulatory arbitrage.
The report’s 17 recommendations are targeted at authorities that are developing and implementing a mandatory clearing requirement as required by G20 commitments. Canadian securities regulators are in the midst of developing a new regulatory regime for OTC derivatives, and have so far published a handful of consultation papers on various issues, such as surveillance and enforcement, trade repositories, and, most recently, segregation and portability. Several other papers are due later this year.
The Canadian Securities Administrators’ initial paper on OTC derivatives regulation recommended mandatory clearing of OTC derivative trades that are determined to be appropriate for clearing; but said that not all participants in the Canadian OTC markets should be subject to mandatory clearing, particularly, smaller, non‐systemically important participants, such as corporate users of derivatives.