European Parliament: Council Reaches Agreement On Measures To Regulate Derivatives Market

The Council today set out its position with a view to negotiations with the European Parliament on a draft regulation aimed at increasing transparency and reducing risk in the over-the-counter (OTC) derivatives market.

The draft regulation calls for reporting of all derivative contracts to trade repositories (i.e.central data centres) and the clearing of standardised OTC derivative contracts through central counterparties (CCPs) in order to reduce counterparty risk (i.e. the risk of default by one party to the contract). This is aimed at preventing the default of one market participant causing the collapse of other market players, thereby putting the entire financial system at risk. To be authorised, a CCP would, for instance, have to hold a minimum amount of capital.

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