OTC Derivatives (Regulation)

The Commission is changing the rules regarding derivatives which are concluded and traded directly between counterparties (“over-the-counter“, OTC). It wishes that having OTC deals be cleared by central counterparties (CCPs) seated in the EU. Different regulations for financial service providers on the one hand and undertakings on the other hand, and a distinction between speculative OTC derivatives and those serving to hedge real corporate risks are to help improve the stability of the financial system.

cepPolicyBrief

The clearing of speculative OTC derivatives through central counterparties (CCP) can increase the stability of the financial system. As long as there is no evidence of any systemic risks posed by interest and exchange rates derivatives, only credit default swaps (CDS) should be subject to this clearing obligation. It is questionable whether a clearly defined distinction between speculative OTC derivatives and those serving to hedge real corporate risks is possible at all. In view of the many unanswered questions, the Commission should not wait until 2014 to publish its Report on the systemic relevance of OTC derivatives.

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OTC Derivatives COM(2010) 484 (publ. 08.28.2014)	PDF	98 KB	Download