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June 3, 2013

OTC Changes Going Wrong?

By Editorial Staff

The over-the-counter derivatives reforms of the Dodd-Frank law made sense, but regulatory implementation of the law is becoming "inconsistent, duplicative and at times contradictory," an industry official recently complained.

George Handjinicolaou, deputy CEO of the International Swaps and Derivatives Association, says Dodd-Frank has eliminated currency and interest rate risks and sought to promote transparency. But now many countries are adding new rules that are hurting global markets, he claims.

For example, he said, the industry has lobbied for single-asset global repositories as a way of promoting more transparency in OTC contracts. But some countries are creating multiple repositories.

"The upshot of this is duplicative efforts around the world, with fragmented information sets containing partial sets of data," Handjinicolaou said.

The ISDA official says this defeats the goal of much OTC reforms: a single place where industry players can go for clear information. "The end result is the absence of a centralized place, where policy makers can look for complete information set about an asset market," he said, "defeating one of the most important purposes of the regulatory transparency requirement."

Handjinicolaou contends OTC margin requirements are different in many major markets of the world.

 

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