The Over-the-Counter (“OTC”) Derivatives Regulators Group (“ODRG”) issued a report that provides an update to the G20 on further progress in resolving OTC derivatives’ cross-border implementation issues.
The ODRG is made up of authorities with responsibility for OTC derivatives markets regulation in Australia, Brazil, the European Union, Hong Kong, Japan, Ontario, Quebec, Singapore, Switzerland and the United States. The report described two areas in which the ODRG is working to develop approaches to address cross-border issues: (i) potential gaps and duplications in the treatment of branches and affiliates, and (ii) the treatment of organized trading platforms and the implementation of the G20 trading commitment.
The report also addressed four areas in which the ODRG is implementing understandings reached previously: (i) equivalence and substituted compliance, (ii) clearing determinations, (iii) risk mitigation techniques for noncentrally cleared derivatives transactions (margin), and (iv) data in trade repositories and barriers to reporting to trade repositories.
The ODRG stated that it will submit its next report for the G20 Leaders Summit in November 2014.
Lofchie Comment: The report “welcomed the set of understandings of the ODRG Principals on cross-border issues relating to OTC derivatives reforms as a major constructive step forward for resolving remaining conflicts, inconsistencies, gaps and duplicative requirements,” and was signed by the Chairpersons of both the SEC and the CFTC. It is difficult to gauge the extent to which the CFTC is prepared to resolve its jurisdictional disputes with regulators in the G-20 countries. On the positive side, the report notes that the SEC’s adoption of its cross-border rules is a sign of cross-jurisdictional progress. On the negative side, the report notes that the European Union is proposing determinations of regulatory equivalence with respect to central counterparty requirements in Japan, Australia, Hong Kong, India and Singapore (though no mention is made of progress with the United States).