2011 was intended to be the year that reforms to the derivatives industry took shape. However, it will be remembered as a year of delays and confusion as regulators struggled to get on top of complex issues within the industry, write David Wigan and William Mitting.
In 2009, the G20 pledged to implement rules that would
enable "all standardised OTC derivative contracts to be traded
on exchanges or electronic trading platforms, where
appropriate, and cleared through central counterparties by
end-2012 at the latest".
It is now clear that the mandate was too ambitious both in
its scope and its deadline. In the US, the Dodd-Frank Act was
passed into law in July 2010. Following the approval of the law
by congress, the burden falls on regulators to write the
individual rules to implement the laws.
It has proved a long and laborious process, dogged by
conflict of definitions and delays. Concerning futures and
options, the Securities and Exchange Commission and the
Commodity Futures Trading Commission have clashed over the
definitions of swaps, the structure of swap execution
facilities and other key areas of the new rules.
The disagreements have meant that rather than a year of
action, 2011 has become a year of delays with few rules being
passed in the year. Of most concern to market participants is
the apparent politicisation of the rule making process, with
votes within the CFTC passing down party lines.
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