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The Over-the-Counter (OTC) Derivatives Regulators Group (ODRG), which is made up of authorities with responsibility for the regulation of OTC derivatives markets in Australia, Brazil, the European Union, Hong Kong, Japan, Ontario, Quebec, Singapore, Switzerland, and the United States, issued a report yesterday that provides an update to the G20 on further progress in resolving OTC derivatives cross-border implementation issues and identifies a cross-border issue that may call for legislative change.
The ODRG provided an update regarding two areas in which it is working to develop approaches to address cross-border issues, one of which relates to potential gaps and duplications in the treatment of branches and affiliates; and the second being treatment of organized trading platforms and implementation of the G20 trading commitment.
The report also addressed four areas in which it was working to implement understandings reached previously including equivalence and substituted compliance; clearing determinations, risk mitigation techniques for non-centrally cleared derivatives transactions (margin), and data in trade repositories and barriers to reporting to trade repositories.
With respect to organised trading platforms, the ODRG Principals agreed that one or more of the following or different approaches should be considered to avoid unnecessary burdens and unintended consequences for foreign organised trading platforms, consistent with its respective statutory and other legal requirements which include recognition, registration and substituted compliance, or registration categories and exemptions.
The ODRG Principals recognize that there are different ways to regulate organized trading platforms and agreed that the Financial Stability Board (FSB) Chair requested that the ODRG, in its September report to the G20, identify any cross-border issues that cannot be resolved without legislative change.
For the November 2014 G20 Leaders Summit, the ODRG also will report on timetables for implementing approaches, as necessary, and will include updates, as needed or appropriate, on issues that the ODRG previously identified as being addressed in other fora or through bilateral engagement.
The ODRG’s report further states that organized trading platforms, regardless of their location, that are recognized or have an applicable license, registration, permission, or exemption in a jurisdiction should be able to be used to comply with a trading commitment of that jurisdiction. They also agreed that whenever possible, and consistent with applicable laws and regulations, the details of laws and regulations applicable to foreign organised trading platforms, including registration requirements, should be made clear before their implementation.
Enhancing clarity and predictability of the details of applicable laws and regulations for various stakeholders should help reduce regulatory uncertainty and avoid unnecessary burdens and unintended consequences. ODRG Principals further agreed that there should be appropriate transitional measures and a reasonable but limited transition period for foreign organized trading
The ODRG anticipates that it will submit its next report in preparation for the G20 Leaders Summit in November 2014.
To read the full report, click here.