Cross-border OTC rules will impact liquidity in Asia
Howard Lee, executive director at the HKMA, delivers keynote address at ISDA conference highlighting extra-territorial impact of OTC rules. October 29, 2013 | Mobasher KazmiThe annual Asia-Pacific gathering of the International Swap & Derivatives Association (ISDA) was held in Hong Kong on October 21st. On the agenda was a host of important issues confronting market participants ranging from: the future of benchmarks in the aftermath of the LIBOR crisis, implications of the G-20 commitments on OTC regulation of the industry to the margin and capital requirements as they related to non-cleared products. In his keynote address, Howard Lee, executive director at the Hong Kong Monetary Authority (HKMA) raised the central issue of how cross-territorial OTC derivatives rules have the potential to undermine liquidity in Asia. Regulators across key markets have already begun the process of introducing new rules designed to engender greater transparency in the industry by requiring mandatory clearing and trade reporting of derivatives. Such stringency is understandable given the scale of the global financial crisis and the role played by derivatives. However, as Lee pointed out, “It is a great challenge to ensure that international rules and regulations are harmonized to minimize overlapping and avoid regulatory gaps.” He cautioned that without such a convergence compliance efforts would be costly if not extremely difficult. Given that US and European financial institutions play a key role in Asian derivative market a failure to address lack of harmonization in rules, “may make it impossible for such cross-border transactions to take place in this region, resulting in withdrawal of liquidity and market fragmentation.” In addition, Lee elaborated on the steps being undertaken by the HKMA in facilitating compliance by market participants underscoring the critical need for mutual recognition of Central Counter-Parties (CCPs). In this regard, he declared the US and EC agreement on the Common Path Forward addressing how regulations would apply to counterparties on cross-Atlantic transactions as encouraging. Lee di... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Clearing & Settlement, Markets & Exchanges, Risk & Compliance, Trading & DataClearing & Settlement,Markets Exchanges,Risk & Compliance,Trading & Data, Clearing & Settlement,Markets & Exchanges,Risk & Compliance,Trading & Data, Keywords:ISDA, OTC Derivatives, CCPs, Trade Reporting, Common Path Forward, HKMA, Howard Lee ISDA, OTC Derivatives, CCPs, Trade Reporting, Common Path Forward, HKMA, Howard Lee
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