Commission consults on reforms of EU derivatives markets
06 July 2009
The Communication outlines the tools to ensure a higher degree of standardization and transparency of the OTC derivatives market. The Commission will also assess the channelling of further trade flow through transparent and efficient trading venues.
If industry is unable to deliver on its commitment by end July, the Commission will have to consider other ways to incentivise the use of CCP clearing, Commissioner McCreevy announced.
However, the Commission will consider further measures to move ahead with increased standardisation and transparency of transactions, to consolidate the move to CCP clearing and ensure that it becomes the norm for OTC derivatives markets as a whole, and to channel further trade flow through transparent and efficient trading venues, wherever possible.
The Communication outlines the tools to ensure that OTC derivatives do not harm financial stability. These tools, which can be combined with each other, are:
- Standardisation could be achieved by encouraging broader take up of standard contracts and electronic affirmation and confirmation services, central storage, automation of payments and collateral management processes.
- Central data repositories: CESR is currently carrying out a feasibility study. The Commission will decide on appropriate actions after its publication.
- CCP clearing: Industry proposal is pending. The Commission also considers that the broader use of CCPs in other OTC derivatives markets should be incentivised, wherever possible.
- Trade execution on public trading venues: The Commission will further assess the channelling of further trade flow through transparent and efficient trading venues and the appropriate level of transparency for the variety of derivative markets trading venues.
The Communication is accompanied by a Commission Staff Working Paper, which contains an overview of derivatives markets, OTC derivative market segments, and an assessment of the effectiveness of current measures to reduce risks, notably as regards Credit Default Swaps (CDS).
The Commission will hold a public hearing on 25 September 2009.
The consultation will be open until 31 August 2009.
© European Commission
