Reforming the OTC derivatives markets

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Author(s): 
Cosmina Amariei

The current state of OTC derivatives trade reporting, central clearing and trade execution and the many challenges ahead were among the topics of discussion at a meeting at CEPS on May 19th.

According to Stephen O’Connor (ISDA), the margin requirements for the non-cleared segment and market fragmentation are the industry’s main concerns. With regard to centralised infrastructures, Michael Davie (LCH.Clearnet) endorsed the ‘defaulter pays’ model rather than risk mutualisation for CCPs, while for trade repositories, Alexander Broderick (DTCC) backed the ‘market utility’ model, designed to satisfy multiple stakeholders. Stephen Taylor (NASDAQ OMX) argued that further innovation could bridge the OTC derivatives markets after financial reforms ECMI-CEPS Lunch Time. OTC and exchange-traded worlds.

The importance of achieving meaningful international regulatory convergence was underlined by Nicolas Gauthier of the European Commission. Uzma Wahhab (FSB) indicated that CPSS-IOSCO final reports on resolution and recovery of FMIs will be published soon.

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