17 September 2014

IOSCO consults on risk mitigation standards for non-centrally cleared OTC derivatives

IOSCO's report 'Risk Mitigation Standards for Non-centrally Cleared OTC Derivatives' which proposes nine standards aimed at mitigating the risks in the non-centrally cleared OTC derivatives markets, has been published and is open for consultation.

The proposed risk mitigation standards would contribute to the G20 effort to strengthen the OTC derivatives market in the wake of the global financial crisis. One of the key planks of the G20 reform programme has been to encourage the central clearing of standardised OTC derivatives.

A substantial proportion of OTC derivatives are not standardised and hence not suitable for central clearing. The proposed standards are aimed at these non-centrally cleared OTC derivatives. The proposed risk mitigation standards are expected to bring about three main benefits:

• Promoting legal certainty and facilitating timely dispute resolution
• Facilitating the management of counterparty credit and other risks
• Increasing overall financial stability

The proposed risk mitigation standards, which are developed in consultation with the Basel Committee on Banking Supervision (BCBS) and the Committee on Payments and Market infrastructures (CPMI), would complement the margin requirements developed by the BCBS and IOSCO in September 2013 in strengthening the non-centrally cleared OTC derivatives market.

Comments on the proposals should be submitted on or before 17 October 2014.

Full press release

Full report

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