Making Derivatives Markets Safer – Implementation
The FSB has designated over-the-counter (OTC) derivatives as one of the priority areas for implementation monitoring. Regular monitoring and detailed reporting in this area is carried out by the FSB Standing on Standards Implementation.
The FSB published in November 2020 its 2020 annual report on the implementation and effects of the G20 financial regulatory reforms. Below is an extract from the report on the status of implementation of OTC derivatives market reforms.
Overall implementation of the G20’s OTC derivatives reform agenda is well-advanced, though progress since 2019 has been very limited.
There has been no increase over the past year in the number of FSB jurisdictions with comprehensive1 trade reporting requirements, central clearing frameworks, margin requirements for non-centrally cleared derivatives (NCCDs), or platform trading frameworks. Final capital requirements for NCCDs are in force for eight jurisdictions (one more since 2019) and were adopted (but not yet in force) by two other jurisdictions.
Authorities in some jurisdictions where requirements were already in force have expanded the scope of trade reporting and central clearing requirements, removed barriers to data sharing, and took steps to strengthen the resilience of CCPs.
Many jurisdictions took regulatory or supervisory measures in response to COVID-19.
To alleviate operational burdens, some jurisdictions relaxed trade reporting requirements. Other jurisdictions strengthened the supervision of and engagement with FMIs, to assess their operational readiness to different risk types. As a response to heightened volatility and margin increases during the March market turmoil, some jurisdictions issued recommendations regarding managing and mitigating procyclicality.
Work is ongoing at the international level to enhance CCP resilience, recovery and resolution, and to make trade reporting truly effective.
The FSB, in close collaboration with CPMI-IOSCO, continues its work to support CCP resolution authorities and CMGs in assessing the adequacy of financial resources for CCP resolution.2 CPMI-IOSCO outlined issues that CCPs should consider regarding default management auction processes, identified practices that CCPs could consider to address these issues, and is working with the industry to make progress on some of these issues.3
The FSB has transferred the governance of various OTC derivatives identifiers to the Regulatory Oversight Committee as of October 2020.4 International work streams continue to focus on globally harmonised derivatives identifiers and data elements to facilitate the effective use of trade reporting data.
Status of implementation
For further information, see the latest FSB progress reports on implementation of OTC derivatives market reforms (as of October 2019) and on removal of legal barriers to trade reporting (November 2018) as well as the FSB report on Review of OTC derivatives market reform: Effectiveness and broader effects of the reforms (June 2017)
1 For the purposes of this sub-section, “comprehensive” means that the standards, criteria or requirements apply to over 90% of OTC derivatives transactions as estimated by that jurisdiction. In the case of margin requirements, “comprehensive” means that the standards, criteria or requirements in force in a jurisdiction would have to apply to over 90% of transactions covered, consistent with the BCBS–IOSCO Working Group on Margin Requirements phase in periods.↩
2 See the FSB Guidance on financial resources to support CCP resolution and on the treatment of CCP equity in resolution (November 2020).↩
3 See Central counterparty default management auctions – Issues for consideration (June 2020) and Cover note to the CPMI-IOSCO report on CCP auctions (June 2020).↩
4 See the FSB press release on the LEI ROC to become governance body for OTC derivatives identifiers (25 September 2020).↩