The G20's meeting in Brisbane begins tomorrow, and international working groups have been burning the midnight oil to have their progress reports ready in time.  One such group, the OTC Derivatives Regulator Group (ODRG), issued a report on November 7 that provides an update to the G20 Leaders regarding the ODRG’s continuing effort to identify and resolve cross-border issues associated with the implementation of the G20 OTC derivatives reform agenda. The report reflects how the ODRG has addressed, or intends to address, cross-border issues identified since the publication of the report published in advance of the St. Petersburg Summit in September 2013.

The work of the ODRG is far from complete.  Though much progress has been made, work still remains to be done.

The Bank for International Settlements (BIS) and the International Organization of Securities Commissions (IOSCO) have published their final framework for margin requirements for non-centrally cleared derivatives. The document sets forth globally agreed standards for all financial firms and systemically important non-financial entities that engage in non-centrally cleared derivatives. Under the guidelines, these firms will have to exchange initial and variation margin commensurate with the counterparty risks arising from such transactions. The aim of this framework is to reduce systemic risks related to over-the-counter (OTC) derivatives markets, as well as to provide firms with appropriate incentives for central clearing while managing the overall liquidity effects of these new requirements.

As the market subject to these regulations is international, it is acknowledged that, notwithstanding the high degree of similarity that already exists between the respective requirements, without coordination, subjecting the global market to the simultaneous application of each other’s requirements could lead to conflicts of law, inconsistencies, and legal uncertainty.

On July 11, 2013 European Commissioner Michel Barnier and United States Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler announced a Path Forward regarding their joint understandings on a package of measures for how to approach cross-border derivatives. This new pact responds to the G20 commitment to lower risk and promote transparency in the over-the-counter (OTC) derivatives markets, but in a way that recognizes the challenges of regulating what is now understood to be a virtually borderless market. Pledging cooperation, the EU and US hope to ensure that regulations put in place "pursue the same objectives and generate the same outcomes." Much coordination between US and EU regulators has already in many places resulted "in final rules are essentially identical, even though the regulatory calendars are not always synchronized."