Monday, 15 May 2017

ISDA's AGM. FSB General Secretary on Derivatives Markets reform

At the ISDA's AGM , 10th May 2017, the General Secretary of FSB delivered a talk on the prospectives  and needs for a future global reform on derivative markets.(Download here)

Whilst at international level,  post crisis policy reforms are almost complete (Central Counter Parties resilience, recovery and resolution, it is now time to assess  the effects and effectiveness of the reforms.

Among the works that lie ahead  data collection by Trade Repositories is a fundamental issue. As is it known, the FBS is developing governance options for  Unique Product Identifier (UPI) , Unique Transaction Identifier (UTI) and other data elements.

Post crisis reforms have resulted in more CCPs offering the services of clearing of OTC derivatives, also on a cross-border basis. Also,there has been developments in risk-control post-trade services (such as portfolio reconciliation, compression and valuation services, as well as better documentation practices).

In relation with main market structures, the crisis and reform brought increased rates of participation in central clearing.  But also CCP clearing members are imposing very high revenue thresholds and/or imposing requirements related to testing of leveraged rations  among others. Such new conditions can be unsurmountable barriers to smaller firms. Other aspects that require attention from the public authorities are related to market fragmentation, for instance its impact on liquidity and trading costs and other consequences still to be fully identified