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The European Commission has this month released a communication document detailing its future policy actions to increase transparency of the derivatives market, reduce counterparty and operational risk in trading and enhance market integrity and oversight. The paper is an accumulation of the work the Commission over the last four months with regards to consulting the industry about an overhaul of oversight of the derivatives market and will eventually form the basis of its legislative proposals, which are due to introduced next year.
The US and European regulatory community is keen to get deeper into the data details of the OTC derivatives market and hopes to increase transparency by mandating the use of clearing counterparties (CCPs) for participants in the more standardised end of the OTC spectrum. This is all part of the regulators’ endeavour to restore trust and confidence in the derivatives sector following the financial crisis and it is likely to have a significant impact on risk management in the market.
It may not have got off to the most auspicious start when it was first announced in 2006, but it seems that Risk & Regulation IT readers are now convinced that the European Central Bank’s (ECB) Target2-Securities (T2S) project will be a positive step forward for the clearing and settlement environment in Europe.
In spite of the concerns raised last week about the potential loopholes in the US government’s plans for an overhaul of the derivatives market (see here), the House Financial Services Committee seems ready to continue with the controversial amendment proposed by Barney Frank, chairman of the committee. The debates into whether the overhaul should include exemptions for firms from new reporting requirements if they use derivatives for “risk management” purposes have continued this week.


















