The Federal Reserve Bank of New York has welcomed commitments by 14 major dealers to ramp up efforts to cut risks and improve post-trade automation and transparency in the over-the-counter derivatives markets.
In a letter to the NY Fed, the dealers outline new commitments to bring greater transparency and standardisation to OTC trading, implement collateral management best practices and expand the use of central clearing in the credit and interest rate derivatives markets.
Describing the goals as "major regulatory priorities", William Dudley, president of the New York Fed states: "We look forward to meaningful progress in these areas."
The letter follows a meeting at the New York Fed between market participants and international supervisors in January.
It sets out five high-level goals for the industry:
- Working to increase transparency and better understand transparency needs in the OTC Derivatives Market, through the use of global data repositories and other initiatives.
- Delivering robust, efficient and accessible central clearing to the OTC Derivatives Markets, increasing the range of products cleared and working towards models that will enable customer access to clearing.
- Driving a high level of product, processing and legal standardization in each asset class with a goal of securing operational efficiency, mitigating operational risk and increasing the netting and clearing potential for appropriate products.
- Working to enhance bilateral collateralization arrangements to ensure robust risk management, including strong legal and market practices and operational frameworks.
- Building on improvements in operational performance, with a focus on driving 'electronification', straight-through-processing, and trade date matching / affirmation and processing.
The latest letter is the fifth in a series of exchanges between major dealers and regulators to set out objectives for cutting risks in OTC trading.
In a statement, the dealers say: "These commitment letters represent not only a powerful statement of intent but also evidence of positive action from the industry, and also reflect significant investment of resources and capital."
Read the full letter:
Download the document now 184 kb (PDF File)