With this summer's passage of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, it's Europe's turn to address financial regulation. This
morning, the European Commission released its Proposal for Regulation on OTC Derivatives, central
counterparties and trade repositories.
The proposal seems to look a lot like the Dodd-Frank's
approach by creating a central trade repository, required margins, and required
collateral. The proposal follows the commitment from the G-20 that
"All standardised OTC derivative contracts should be
traded on exchanges or electronic trading platforms, where appropriate, and
cleared through central counterparties by end-2012 at the latest. OTC
derivative contracts should be reported to trade repositories. Non-centrally
cleared contracts should be subject to higher capital requirements."
The proposal excludes non-financial firms who use
derivatives to mitigate risk in their core business from the central clearing
More analysis to come.
I'm reading through the proposal and the supporting
additional commentary on developments in compliance and ethics, visit Compliance Building,
a blog hosted by Doug Cornelius.