IOSCO Publishes Report on International Standards for Derivatives Market Intermediary Regulation

June 11, 2012 /

The International Organization of Securities Commissions has published a report entitled International Standards for Derivatives Market Intermediary Regulation, which recommends high-level international standards for the regulation of market participants that are in the business of dealing, making a market or intermediating transactions in over-the-counter (OTC) derivatives.

Historically these derivatives market intermediaries (DMIs) often have not been subject to the same level of regulation as participants in the traditional securities market. Without sufficient regulation, some DMIs operated in a manner that created risks to the global economy that manifested during the
financial crisis of 2008.

The Report follows on the commitment by G-20 leaders in 2009 to reform the OTC derivatives market in response to the crisis. It takes into account distinctions between the OTC derivatives market and the traditional securities markets, and the differences in jurisdictional approaches of international market

The recommendations in the Report are intended to address DMI obligations that should help mitigate systemic risks; requirements intended to manage ounterparty risk in the OTC derivatives markets; and protecting participants in the OTC derivatives markets from unfair, improper or fraudulent practices.

The Report draws on the extensive work IOSCO has done on traditional securities market intermediaries, in an effort to harmonize the recommendations applicable to DMIs and to avoid the creation of unnecessary burdens on entities that act as both traditional securities market intermediaries and DMIs.

The recommendations are made regarding the following substantive areas:
 Registration/licensing standards;
 Capital standards or other financial resources requirements for non-prudentially regulated DMIs;
 Business conduct standards;
 Business supervision standards; and
 Recordkeeping standards.

Consistency among market authorities with respect to the regulation of DMIs is essential to the successful oversight of the global OTC derivatives market particularly because many DMIs operate in multiple jurisdictions.


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