The EU Parliament's Committee on Legal Affairs published a drafted opinion for the Committee on Economic and Monetary Affairs (ECON) on the proposal for a European Parliament and Council regulation on over-the-counter (OTC) derivatives, central counterparts and trade repositories.
The financial crisis raised concerns regarding the resilience and transparency of the over-the-counter (OTC) derivatives market. The G20 agreed that all standardised OTC derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties by end-2012 at the latest. OTC derivative contracts should be reported to trade repositories.
This regulation sets out the conditions for authorising Central Counterparties (CCPs), the criteria to examine to ensure appropriate characteristics for central clearing, and the reporting of derivatives to trade repositories where the aggregate information can be used inter alia for analysis of systemic risk. Central clearing can itself pose systemic risks unless introduced appropriately, so CCPs must have robust risk and default management strategies that do not put taxpayers in the front line.
Maintaining a diverse and competitive market plays its part in this for which pricing should be transparent and tying arrangements avoided. While promoting the resilience and transparency of derivatives markets, regulation must equally maintain the efficiency of these markets for hedging by end-users – be they financial or non-financial. Maintaining the international nature of this market promotes both these objectives when underpinned by cooperation between supervisors and convergent international standards.
CCPs are regulated by bank prudential regulators in most Member States and at the European level it will be EBA that has much of the expertise, so it is essential that ESMA and EBA work closely together. These ESAs will have to make decisions about suitability for clearing following a pragmatic approach to the Meroni judgement.

Full opinion