OTC Derivatives Market Reforms: Eleventh Progress Report on Implementation
This progress report sets out details about the implementation of reforms to the over-the-counter (OTC) derivatives market agreed by the G20. These reforms are: trade reporting of OTC derivatives; central clearing and, where appropriate, exchange or electronic platform trading of standardised OTC derivatives; and higher capital and minimum margin requirements for non-centrally cleared derivatives (NCCDs).
The report finds that progress implementing the reforms is continuing. Trade reporting requirements for OTC derivatives and higher capital requirements for NCCDs are mostly in force; central clearing frameworks are being implemented. By contrast, current indications are that a substantial number of jurisdictions will not have margin requirements for NCCDs in force in accordance with the internationally agreed implementation schedule for these reforms, while platform trading frameworks are relatively undeveloped in most jurisdictions. Authorities continue to note a range of implementation challenges, many of which FSB members are seeking to address through international workstreams. Highlights from the progress report are:
- Trade reporting: requirements covering over 90% of OTC derivative transactions were in force as at 30 June 2016 in 19 out of 24 FSB member jurisdictions; by end-2017, 23 of these jurisdictions expect to have such requirements in force. Work is progressing on removing the legal barriers to OTC derivatives trade reporting, on which the FSB will publish an update in the coming weeks. Work is also progressing on developing harmonised trade and product identifiers, and the governance frameworks around those.
- Central clearing: the majority of FSB jurisdictions (14) had in force frameworks for determining when standardised OTC derivatives should be centrally cleared that cover over 90% of OTC derivative transactions. Central clearing requirements were adopted in several FSB jurisdictions since the tenth progress report (November 2015) with the total set to reach 10 jurisdictions by end September 2016, mostly for interest rate derivatives, an asset class for which there is widespread availability of central counterparties (CCPs).
- Capital and margin: while higher capital requirements for exposures to NCCDs are largely in force (with 20 jurisdictions having requirements in force that apply to over 90% of OTC derivatives transactions), less progress has been made in the implementation of margin requirements for NCCDs. By end September 2016 requirements consistent with the internationally agreed phase-in schedule are due to be in force in only three jurisdictions. Furthermore, at this time around half of member jurisdictions do not appear on track to have implemented variation margin requirements in accordance with the second and final phase (March 2017).
- Platform trading: Frameworks for determining mandatory platform trading requirements are in force in 11 jurisdictions, and requirements are in place in three jurisdictions. Few other jurisdictions have further implementation steps planned.
The FSB will publish a further progress report ahead of the G20 Summit in July 2017.