International Regulatory Strategy Group
Published 21 Oct 2010
Derivatives play a vital role in managing risk for financial institutions, investors and non-financial corporates. Both exchange-traded and OTC derivatives have a clear social and economic benefit. Europe accounts for more than half of all global OTC derivatives activity, and is home to several major derivatives exchanges. Taken alone, the UK is the world’s largest OTC derivatives trading centre. Derivatives are an important contributor to the economies of the EU.Financial reform following the credit crisis is an essential process that market participants recognise as important and necessary. Regulatory change should address the true causes of systemic fragility and avoid erecting unnecessary barriers within competitive financial markets.
This paper, produced in response to the European Commission consultation on OTC derivatives, underlines the following policy objectives:
legislation is tailored to each product segment and market, to ensure that
benefits to systemic risk outweigh any negative market impacts.
legislation does not unduly harm the competitive environment under which Europe has fostered innovation and nurtured the world’s largest OTC derivative centre.
the market remains user-friendly. Investors’ interests should be considered explicitly in discussions on systemic risk reduction and operational efficiency measures.