Various global regulators issued a report ahead of the upcoming G20 summit, outlining their commitments to cooperate as they implement reforms to the oversight of over-the-counter (OTC) derivatives markets.
Regulators for the U.S., Europe, Ontario and Quebec, and various markets in Asia, issued the report regarding cross-border implementation of OTC derivatives reforms. This follows a request from the G20 finance ministers earlier this year, and is being submitted ahead other upcoming summit in St. Petersburg on Sept. 5-6.
The report, which notes that rulemaking in this area should be complete in 2014 or early 2015, sets out a number of understandings between the regulators that are designed to guide the cross-border implementation of OTC derivatives reforms, given the differences between the various countries markets and legal systems.
These understandings aim “to improve the cross-border implementation” of reforms, the report says. For example, it notes that regulators agree that early, and comprehensive, consultation is essential when assessments of equivalence or substituted compliance are being carried out.
It says that a flexible, outcomes-based approach should be used for final assessments of equivalence, but that a ‘stricter-rule’ approach would apply to address gaps in mandatory trading or clearing obligations.
Additionally, it says that the authorities have a framework for consultation on mandatory clearing determinations; that jurisdictions should remove barriers to firms reporting to trade repositories, and regulators access to that data. They also agreed that there should be a transition period for foreign entities to implement OTC derivatives reforms.
The report notes that this effort will continue to face challenges, including: authorities’ direct access to registrant information, and the treatment of foreign bank branches and subsidiaries.
It also stresses that open communication, flexibility in the application of cross-border regulation, “will be needed to make progress toward cross-border consistency.”