In 2009, the G20 Leaders agreed to reforms in the OTC derivatives market to achieve central clearing and, where appropriate, exchange or electronic trading of standardized OTC derivatives; reporting of all transactions to trade repositories; and higher capital as well as margin requirements for non-centrally cleared transactions. These reforms are being implemented globally through legislative and regulatory measures. Reforms in the U.S. are being carried out under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and rulemakings by U.S. agencies, including the Commodity Futures Trading Commission, Securities and Exchange Commission, as well as prudential regulators including the Federal Reserve.
A resilient and well-functioning over-the-counter (OTC) derivatives market is an important component of the financial markets and broader global economy. The OTC derivatives market:
- Serves important economic purposes, such as enabling market participants to hedge exposures, invest and manage risks; and
- Is of systemic relevance due to the interconnectedness between financial institutions that are also active in other key financial markets and market infrastructures.