Tuesday, November 11, 2014

Global OTC Working Group Updates the G20

OTC Derivatives Regulators Group Issues Report on Cross-Border OTC Regulation

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.  The report makes clear that the authors understand that they face a moving target, and though much progress has been made, they are no where near the end. The report reflects the acknowledgement that as ODRG member authorities continue in the process of implementing their laws and rules for domestic and cross-border transactions, additional cross-border issues could be identified which may need to be considered by the ODRG in order to seek resolution. The ODRG Principals also restated their commitment to addressing such cross-border issues as they are identified.

While legal frameworks continue to be implemented, ODRG members expect certain cross-border issues may continue to require attention. Further,ODRG members anticipate that as new rules are implemented, additional cross-border issues could be identified that may need to be considered by the ODRG in order to seek resolutions.

The ODRG previously identified two areas in which it was working to develop approaches to address cross-border issues: 

  1. potential gaps and duplications in the treatment of branches and affiliates; and 
  2. treatment of organized trading platforms and implementation of the G20 trading commitment. 

Their latest progress report indicates that the ODRG Principals agreed to discuss development of a framework for early consultation among authorities on mandatory trading determinations, as permitted by the member jurisdictions' rule and policy-making restrictions. They also agreed to discuss how ODRG members could work closely and coordinate bilaterally or multilaterally, as appropriate, to avoid unnecessary burdens and unintended consequences, including towards alignment of the timing of implementation where practicable. So, look for consultation papers and rule proposals in rapid fire early in 2015 on these topics.  

*The ODRG is made up of authorities with responsibility for the regulation of OTC derivatives markets in Australia, Brazil, the European Union, Hong Kong, Japan, Ontario, Quebec, Singapore, Switzerland, and the United States.