28 January 2015

IOSCO published final report on risk mitigation standards for non-centrally cleared OTC derivatives

This set of risk mitigation standards, developed in consultation with the BCBS and the Committee on Payments and Market Infrastructures, will further strengthen the non-centrally cleared OTC derivatives market.

IOSCO published the final report Risk Mitigation Standards for Non-centrally Cleared OTC Derivatives, which sets out nine standards aimed at mitigating the risks in the non-centrally cleared OTC derivatives markets.

The standards encourage the adoption of sound risk mitigation techniques to promote legal certainty over the terms of the non-centrally cleared OTC derivatives transactions, to foster effective management of counterparty credit risk and to facilitate timely resolution of disputes. The risk mitigation standards cover the following key areas:

• Trading relationship documentation and trade confirmation
• Process and/or methodology for determining valuation
• Portfolio reconciliation
• Portfolio compression
• Dispute resolution

Lee Boon Ngiap, Chair of the IOSCO Working Group on Risk Mitigation Standards for Non-centrally Cleared Derivatives, and Assistant Managing Director of the Monetary Authority of Singapore, said: “The risk mitigation standards, along with the margin requirements, will help market participants better manage risks in transacting in non-centrally cleared OTC derivatives and improve the resilience of the non-centrally cleared OTC derivatives market.”

Full report

Full press release

Report’s comment letters

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