The European Fund and Asset Management Association has welcomed the publication of a regulation on over-the-counter derivatives, central counterparties and trade repositories.
Efama supports the European Commission’s aims to increase transparency of the derivatives market, reduce risk and enhance market integrity and oversight.
In particular, it welcomes the reduction of counterparty risk that central counterparties would bring and the enhanced transparency to mitigate systemic risk.
Peter De Proft, director general of Efama, says: “Efama fully supports the Commission’s efforts to introduce regulation for OTC derivatives and move from OTC bilateral clearing to central clearing for standardised derivative contracts. Derivatives are a very important tool for institutional investors seeking to hedge their risks, therefore we welcome the creation of a robust clearing infrastructure, truly enhancing protection for all market participants. However, derivatives regulation must benefit all stakeholders and protect market users, in particular buy-side investors.”
He adds that a move to mandatory central clearing will have a big impact on all investors and savers, as derivatives are widely used by pension funds, insurance companies and retail fund managers.
He believes Commission proposals should provide for risk reduction for buy-side investors through effective segregation of collateral and for robust risk management and governance for central counterparties.
“Most importantly, allocation of the costs for central clearing among market players must be fair, and EU citizens should not shoulder excessive costs with their pensions and savings,” he says.
