Shearman & Sterling LLP | FinReg | Financial Stability Board Publishes Report on Progress of Over-The-Counter Derivatives Market Reforms
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  • Financial Stability Board Publishes Report on Progress of Over-The-Counter Derivatives Market Reforms
    10/15/2019
    The Financial Stability Board has published a report on the progress its member jurisdictions have made in 2019 on the implementation of agreed G20 reforms to over-the-counter derivatives markets. The report finds that there has been limited additional implementation of the reforms since the FSB’s 2018 report.

    The report discusses each of the six key areas of the G20 reforms in turn:
     
    1. Trade reporting: 23 out of 24 member jurisdictions now have comprehensive trade reporting requirements in force (an increase of two since the 2018 FSB report); international workstreams are underway to address the effectiveness of trade reporting, including the implementation of regimes for Unique Transaction Identifiers, Unique Product Identifiers and Critical Data Elements;
    2. Central clearing:18 out of 24 member jurisdictions have comprehensive standards for determining when standardized OTC derivatives should be centrally cleared (no new jurisdictions have achieved this since the 2018 FSB report); international efforts to foster more resilient CCPs are ongoing, including a joint discussion paper published by the Committee for Payments and Market Infrastructures and the International Organization of Securities Commissions on CCPs’ default management auctions;
    3. Margin requirements for non-centrally cleared derivatives: 16 out of 24 member jurisdictions have comprehensive margin requirements for uncleared derivatives (representing no increase since the 2018 FSB report);
    4. Higher capital requirements: 23 out of 24 member jurisdictions have implemented higher capital requirements for (representing no increase since the 2018 FSB report); only seven jurisdictions (an increase of four since end-November 2018) have implemented the final standardized approach for counterparty credit risk and capital requirements for bank exposures to CCPs;
    5. Platform trading requirements: 13 out of 24 jurisdictions have implemented comprehensive platform trading requirements (again, representing no change since the 2018 FSB report); and
    6. Cross-border coordination: only Singapore has begun exercising deference with regard to foreign jurisdictions’ regimes during the relevant reporting period, although several jurisdictions that already exercised deference in the past extended that exercise to further jurisdictions; the FSB has published a report on market fragmentation which identifies several areas for further work to address this issue and enhance the clarity of deference recognition processes.

    The report follows the FSB’s June 2019 progress report on all G20 recommended financial reforms. In that report, the FSB noted that implementation of reforms has lagged in the OTC derivatives sector since 2018, although adoption of core Basel III elements and the application of the policy framework to global systemically important institutions is generally well advanced.

    View the FSB's report.

    View details of the FSB's June 2019 progress report on G20 financial reforms.

    View details of the FSB's governance arrangements for UPIs.

    View details of the CPMI and IOSCO's governance arrangements for critical data elements.

    View details of the CPMI and IOSCO discussion paper on default management auctions.

    View details of the FSB’s 2019 report on market fragmentation.

    View details of the FSB’s 2018 report on OTC derivatives market reforms.

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