Staying on track to meet the G20’s December deadline for global derivatives regulation reform, the European Securities and Markets Authority released draft rules on Monday intended to make the historically opaque market safer and more transparent. The draft rules flesh out an already-passed framework law in much the same way that the CFTC and the SEC are working to implement rules mandated by the Dodd-Frank Act.
“OTC derivatives impact both financial markets and the real economy but have not been subject to regulatory requirements,” said ESMA Chairman Steven Maijoor.
Salient rules include:
- Which contracts must be cleared;
- How clearing houses must be operated;
- Clearing houses will not be required to clear contracts they cannot manage;
- Proxy hedging will be included under commercial hedging, and will there be exempt from mandatory clearing;
- Thresholds below which clearing will not be required: 1 billion euros in notional value for credit and equity derivatives, 3 billion euros in notional value for interest rate, FX, and commodity derivatives.
ESMA will accept public comment before finalizing the rules in September.