As Over-the-counter (OTC) derivatives volume keep on growing steadily the implementation of reforms to the over-the-counter (“OTC”) derivatives market is becoming a global affair
As Over-the-counter (OTC) derivatives volume keep on growing steadily the implementation of reforms to the over-the-counter (“OTC”) derivatives market is becoming a global affair and though the logic behind the move to central clearing is sound, the industry’s task in meeting the G-20’s deadline is by no means simple. Now that the two larger markets for OTC derivates are at the turning point trying to fine tune the regulatory framework for the sake’s of market consistency financial institutions must be ready to face the operational challenges set by central clearing counterparties (CCP) which essentially means to take choices on swap execution, meet stringent collateral requirements, and divest certain swap trading desks. Participants need to act urgently, as new post-financial reform rules begin to be finalized in the next three to six months. By proactively responding to the new shape of CCP governance, risk management and capital as well as implementation challenges for clearing members and their customers, market players can take advantage of opportunities, protect franchise value and avoid the potential downside impacts of these changes. Only those firms what will be capable to timely prioritize imminent market developments and rulemaking against the longer-term, global regulatory change process and related jurisdictional challenges will be winners in the game.
