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 Financial Stability Board has published a new “Regulatory Framework for Haircuts on Non-centrally Cleared Securities Financing Transactions.”  The new framework addresses certain shadow banking risks relating to securities financing transactions by limiting the build-up of excessive leverage outside the banking system and reducing the procyclicality of that leverage.

The different approaches to the interpretation of MiFID I across Member States mean that there is no commonly-adopted application of the definition of derivative or derivative contract in the EU for some asset classes. Whilst this issue has in the past been noted as a concern since the implementation of MiFID, the practical consequences have come to the forefront with the implementation of the European Markets Infrastructure Regulation (EMIR).

What exactly is a derivative?  That’s precisely what the European Securities and Markets Authority (ESMA) wants to pin down with it’s latest consultation draft.  Why do they care?  Because ESMA is worried that inconsistent application of the definitions of derivative instruments could have a significant detrimental effect on the consistent application of European Market Infrastructure Regulation (EMIR). According to ESMA, it is imperative that references to the these derivatives definitions be clarified to ensure that regulatory authorities are all taking a common approach to setting reporting and clearing obligations in Europe.