Further action is required on implementing OTC derivative margin requirements, platform trading commitments and on removing legal barriers to trade reporting and authorities’ access to data held by trade repositories according to the FSB.

In its latest report the group, which monitors and assesses vulnerabilities affecting the global financial system, says trade reporting requirements for OTC derivatives and higher capital requirements for non-centrally cleared derivatives (NCCDs) are mostly in force and central clearing frameworks are being implemented.

By contrast, current indications are that a substantial number of jurisdictions will not have margin requirements for NCCDs in force in accordance with the internationally agreed implementation schedule for these reforms, while platform trading frameworks are relatively undeveloped in most jurisdictions.

Authorities continue to note a range of implementation challenges, many of which FSB members are seeking to address through international workstreams. 

Trade reporting requirements covering over 90% of OTC derivative transactions were in force as at 30 June 2016 in 19 out of 24 FSB member jurisdictions; by end-2017, 23 of these jurisdictions expect to have such requirements in force. 

Work is also progressing on developing harmonised trade and product identifiers, and the governance frameworks around those. 

The majority of FSB jurisdictions (14) had in force frameworks for determining when standardised OTC derivatives should be centrally cleared that cover over 90% of OTC derivative transactions.

Central clearing requirements were adopted in several FSB jurisdictions since the tenth progress report (November 2015) with the total set to reach 10 jurisdictions by end September 2016, mostly for interest rate derivatives, an asset class for which there is widespread availability of central counterparties (CCPs). 

While higher capital requirements for exposures to NCCDs are largely in force (with 20 jurisdictions having requirements in force that apply to over 90% of OTC derivatives transactions), less progress has been made in the implementation of margin requirements for NCCDs.

By end-September 2016 requirements consistent with the internationally agreed phase-in schedule are due to be in force in only three jurisdictions. 

Furthermore, at this time around half of member jurisdictions do not appear on track to have implemented variation margin requirements in accordance with the second and final phase (March 2017). 

Such jurisdictions should urgently take steps to implement these reforms. 

In terms of platform trading, frameworks for determining mandatory platform trading requirements are in force in 11 jurisdictions, and requirements are in place in three jurisdictions. Few other jurisdictions have further implementation steps planned.

FSB added that it is important that all jurisdictions have frameworks in place for regularly assessing when it is appropriate for transactions to be executed on organised trading platforms. 

Another report, on legal barriers to reporting and accesing OTC derivatives data, has also been published by the FSB.

This provides a summary of FSB member jurisdictions’ planned actions to remove legal barriers to reporting complete transaction information to trade repositories and to authorities’ access to data held in trade repositories.

FSB members have raised concerns that restrictions on reporting complete data limit its usefulness to authorities in carrying out their regulatory mandates, including monitoring and analysing systemic risk and market activity. 

Barriers to authorities’ access to data held in trade repositories also limit the ability of authorities to make full use of the data.

 Further significant planning and implementation efforts will be needed in order to meet the agreed June 2018 deadlines.