OTC Derivatives Regulation

18 March 2010

Reform of the OTC derivatives is gathering pace as regulators seek to find ways to prevent a repeat of the near collapse of the financial system after the demise of Bear Stearns, the default of Lehman Brothers and the bailout of AIG.  Central to this effort in both Washington and Brussels is the shift – in the words of the EU’s October Communication – from a “predominantly OTC bilateral to more centralised clearing and settlement”.

However, both professionals in the market and their customers are becoming concerned about how the reform process is developing.

Some of the key questions are:

  • Will differences between the US’s prescriptive approach and Europe’s more consultative line lead to the potential for regulatory arbitrage?
  • Which trades will have to be cleared?
  • What will the capital charges be for trades that do not have to be cleared?
  • Will non-financial users of OTC products be exempted from capital charges?
  • Does the shift to centralised clearing simply shift systemic risk from one part of the system to another?
  • How should the regulation and governance of clearers be changed to deal with these perceived problems?
  • How will the reform of clearers affect market participants?
  • What is the best way of increasing trade transparency and governance standards among trade depositories?

The purpose of this highly topical conference is to provide an update for both professionals in the market and their customers on where this reform process stands and what it is likely to mean for them.

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