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Proposed OTC Regulations Out for Public Comment

July 6, 2014



Proposed regulations for unlisted over-the-counter derivatives (OTC) have been published for public comment.

The proposed regulations will ensure that South Africa can meet its G20 obligations in terms of the regulation of the OTC derivatives market.

The phrase "over-the-counter" can be used to refer to stocks that trade via a dealer network, as opposed to on a centralized exchange. It also refers to debt securities and other financial instruments such as derivatives, which are traded through a dealer network.

The regulations were published by National Treasury, the Reserve Bank and the Financial Services Board (FSB) today.

OTC derivatives were a key contributor to the global financial crisis and regulators around the world have been working towards consistent standards for derivatives. A number of G20 member countries, including South Africa, have made significant progress towards achieving this.

"According to the recently published Financial Stability Board 7th Progress Report on Implementation of OTC Derivative Market Reforms1, most jurisdictions, including South Africa, have completed the reforms to their legislative frameworks needed to implement the G20 commitments.

"These proposed regulations are the last step in what has been a multi-year international effort to improve the regulation of derivatives," said Treasury in a statement.

The reforms are necessary to improve transparency in the global derivatives market, mitigate systematic risk and protect against market abuse, said Treasury.

"As a member of the G20, South Africa is committed to G20 agreements for OTC derivatives market reforms."

The proposed regulations will bring the South African regulatory framework in line with those implemented in other G20 jurisdictions. The regulations will enhance supervision of the OTC derivatives markets in South Africa by requiring that over-the-counter derivative providers (ODPs) be authorised as a category of regulated person and by ensuring sound and resilient CCPs.

In addition, the regulations will ensure promotion of transparency of the derivatives markets through regulations applicable to the licensing of trade repositories.

Later this year, the FSB release notices relating to the criteria for authorisation as an ODP, an ODP code of conduct and the reporting obligations in terms of derivatives.

The public can submit their comments via email to financial.policy@treasury.gov.za with the subject title FMA: Ministerial regulations. The deadline for submission is 3 September 2014.

Copies of the policy document and the proposed regulations can be found on the National Treasury website at www.treasury.gov.za.


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Source: AllAfrica


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