On Tuesday, Commodity Futures Trading Commission Chairman Gensler and European Commissioner Michael Barnier issued ajoint statement in which they reiterated their mutual support for the reforming the OTC derivatives markets through the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the September 2010 European Commission proposal for a Regulation on OTC derivatives, central counterparties and trade repositories. Chairman Gensler also remarked on OTC derivatives reform at a EUROFI Financial Services Forum Panel on Trading and Clearing in Brussels, Belgium.
The issues discussed in Commissioner Barnier and Chairman Gensler’s joint statement included: "(i) comprehensively regulating derivatives dealers for capital and margin, recordkeeping and reporting and business conduct standards; (ii) requiring standardized OTC derivatives to be cleared by central counterparties, imposing stringent prudential and organization rules for central counterparties and imposing risk mitigation standards for non-standardized contracts that are not centrally cleared; and (iii) increasing transparency of the OTC Derivatives markets through trading, where appropriate reporting to data repositories and reporting to the public. They emphasized the need for international co-operation to ensure global access to all data on derivatives transactions maintained by trade repositories." They also discussed the need for international cooperation with respect to reporting requirements by derivatives markets and the importance of position limits to future regulation.
In his remarks at the EUROFI Financial Services Forum Panel on Trading and Clearing, Chairman Gensler focused on the themes of transparency and clearing in OTC derivatives trading. He argued that "transparent trading not only gives regulators a clear depiction of the marketplace, but it gives the public the many benefits of price discovery markets. The more transparent a marketplace is to the public, the more liquid it is, the more competitive it is and the lower the costs for companies using derivatives to hedge risk." He cited the United States’ adoption of a real time reporting requirement as an example, and applauded the European Commission for planning to address public transparency as well.
With respect to clearing, Chairman Gensler said that "Another area where the U.S. and Europe have a strong partnership is requiring clearing of standardized derivatives – those derivatives that Americans call "clearable" and that Europeans often called ‘eligible.’ Both the Dodd-Frank Act in the U.S. and the EC’s proposal on OTC derivatives, central counterparties and trade repositories includes strong clearing requirements."