The Investment Management Association (IMA) has published a statement welcoming the Commission’s consultation on OTC (over-the-counter) derivatives and agreeing with its objective of making central clearing houses take on most of the responsibility for the clearing and settlement of OTC contracts.
Jane Lowe, Director of Markets at the IMA, said:
"Financial markets are for investors and capital raisers, not for intermediaries. Therefore we welcome the Commission's proposals to promote the clearing and settlement of OTC derivative contracts in central clearing houses. This will allow for better counterparty and collateral risk management; and greater certainty and speed of action in the event of a counterparty default. It should also bring clearer information to the market which will assist investors with daily pricing of portfolios.
However, we urge the Commission to ensure that competition disciplines are maintained as there is scope for monopolistic structures emerging. A high level of governance is also required so that clearing houses are not vulnerable to inappropriate shareholder and stakeholder influences. Lastly, if clearing houses are to take on a more substantial role in terms of market infrastructure it is important that they should have sufficient capital support to see this role through."
View IMA response to the European Commission’s consultation on OTC derivatives, 3 September 2009