European lawmakers have hammered out a plan to overhaul the $700 trillion OTC derivatives market. Under an entirely new regulatory structure, financial institutions, including banks and money managers, will be encouraged to gravitate away from the OTC derivatives markets.
The European Securities and Markets Authority will be responsible for setting the details of the reforms by the end of September. The European Commission says it will approve the new rules within three months.
Reportedly, those who do not shift to a counterparty-based market, such as a futures exchange, will incur higher capital charges, under the presumption that the OTC markets are riskier. The new rules also will require all off-exchange deals to be recorded.
EU agrees to overhaul regulation of derivatives