The European Commission (EC) has released its long-awaited guidelines on reducing risk in Europe’s over-the-counter (OTC) derivatives markets.
The commission has launched a public consultation on the guidelines, which closes on 31 August, and will present the results in a public hearing on 25 September. It will then publish conclusions before the end of its current mandate on 31 October and present initiatives, including legislative proposals where justified, before the end of the year.
In the document released today, the commission outlines four ‘tools’ to ensure that OTC derivatives do not harm financial stability. The first is standardisation of derivatives, which the EC contends would enhance operational efficiency and reduce operational risks through broader take-up of standard contracts, electronic trading affirmation and confirmation, central storage, automation of payments and collateral management processes.
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