REFORM OF EXISTING AND BUILDING OF NEW INSTITUTIONAL STRUCTURE OTC FINANCIAL DERIVATIVES MARKET
REFORM OF EXISTING AND BUILDING OF NEW INSTITUTIONAL STRUCTURE OTC FINANCIAL DERIVATIVES MARKET

Author(s): Dragan Miodrag Momirović
Subject(s): Economy, Financial Markets
Published by: ASERS Publishing
Keywords: OTC financial derivatives; standardization; central clearing, exchange or electronic platform trading; trade repositories systemic risk
Summary/Abstract: The financial crisis which occurred during 2008 has shown that markets are OTC (over-the-counter) derivatives unregulated and insufficiently controlled and represent a potential source of systemic risk build up. At summits in Pittsburgh G20 leaders by made binding recommendations for the reform of the existing buildings and the new institutional structure of OTC financial derivatives market. Recommendations are relating to the standardizations of contracts, mandatory central clearing of all transactions, trading across exchanges or electronic platforms, capital and margin requirements and reporting through trades repositories. Analogously, the proposed recommendation at the international level, the FSB is on undertaken is of initiatives, together, with other relevant international organizations with improved order to existing building and new proposals and measures. FSB has announced the first report after consulting relevant stakeholders on the OTC market of financial derivatives revised and adopted in final form at the G20 summit (2011) in Cannes.US and EU and other countries have taken appropriate actions and measures to implement the proposals and recommendations by Pittsburgh Summit. The US has adopted Dood-Frank Act, which in Section VII regulates OTC derivatives, with final implementation 15 July 2011. EU has adopted EMIR, as the main regulators, whose provisions are binding on all jurisdictions and its implementation will commence by of end 2012. The new structure of OTC markets should be reduced systemic risk and improve the risk management contracting partners, to ensure transparency and improve the financial infrastructure of derivatives markets.

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