International Swaps And Derivatives Association Response To Call For Evidence - Pre- And Post-Trade Transparency Provisions Of The Markets In Financial Instruments Directive (MiFID) In Relation To Transactions In Classes Of Financial Instruments Other Tha

The International Swaps and Derivatives Association (ISDA) welcomes the opportunity to respond to the Commission's call for evidence in advance of its proposed report under article 65(1) MiFID addressing the possible expansion of pre- and post-trade transparency requirements to transactions in classes of financial instruments other than shares.

ISDA, which represents participants in the privately negotiated derivatives industry, is the largest global financial trade association, by number of member firms. ISDA was chartered in 1985, and today has over 725 member institutions from 50 countries on six continents. These members include most of the world's major institutions that deal in privately negotiated derivatives, as well as many of the businesses, governmental entities and other end users that rely on over-the-counter derivatives to manage efficiently the financial market risks inherent in their core economic activities.

In this response, we focus on those issues raised by the call for evidence which are particular to over-the-counter (OTC) derivatives. In addition, we support the joint response of a number of industry associations, including ISDA, dated 15 September 2006 attached as Annex A (the Joint Response) which deals with the more general issues raised by the call for evidence across the wider range of asset classes.

ISDA believes that mandated transparency requirements would not help and are likely to harm the efficiency of OTC derivatives market activity. ISDA believes that, before imposing a regulatory solution, it is essential to demonstrate that a market failure has occurred and that, so far, there has been no evidence of market failure in the OTC derivatives market. Even if such evidence were found, however, it would not be sufficient to warrant a regulatory solution: It is also necessary to demonstrate that the mandated solution is likely lead to an improvement over the current state, so that regulatory intervention is limited to cases that are justified by a cost-benefit analysis.

Click here for full details.