The study by the Technical Committee of the International Organisation of Securities Commissions analyses the benefits, costs, and challenges associated with a switch from opaque trading to more transparent exchange-based trading.

As of December 2009, approximately 89% of derivatives contracts were transacted over-the-counter (OTC). While the number of derivatives contracts that are traded on organised platforms has grown throughout 2009 and 2010,the OTC portion of the market continues to dominate.

Iosco suggests that a transition away from OTC markets need not impinge on liquidity, so long as regulators are flexible in their definitions of what constitutes an organised platform and take a co-ordinated approach.

Hans Hoogervorst, chairman of Iosco's Technical Committee, says: "While there is debate amongst regulators regarding the characteristics that an entity should exhibit to qualify as an eligible organised platform, the overriding principle that regulators must observe is that they need to coordinate their efforts in facilitating the transition of OTC derivatives trading to organised platform trading to ensure that the objectives of the G-20 are achieved, and not undermined."

Iosco list seven key characteristics that such organised platforms must encompass, including registration with a competent regulatory authority, fair access, pre- and post-trade transparency arrangements, operational efficiency and resilience, active market surveillance capabilities, transparent rules and cross-platform interaction.

However, regulators in the US and Europe are split on an eighth condition that would require platforms to seek liquidity elsewhere and trade with multiple liquidity providers rather than relying on just one, such as a bank.

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