September 17, 2014 - The International Organization of Securities Commissions today published the consultation report Risk Mitigation Standards for Non-centrally Cleared OTC Derivatives, which proposes nine standards aimed at mitigating the risks in the non-centrally cleared OTC derivatives markets.

The proposed risk mitigation standards would contribute to the G20 effort to strengthen the OTC derivatives market in the wake of the global financial crisis. One of the key planks of the G20 reform programme has been to encourage the central clearing of standardised OTC derivatives. However, a substantial proportion of OTC derivatives are not standardised and hence not suitable for central clearing. The proposed standards are aimed at these non-centrally cleared OTC derivatives.

The proposed risk mitigation standards are expected to bring about three main benefits:

Promoting legal certainty and facilitating timely dispute resolution

Facilitating the management of counterparty credit and other risks

Increasing overall financial stability

The proposed risk mitigation standards, which are developed in consultation with the Basel Committee on Banking Supervision (BCBS) and the Committee on Payments and Market Infrastructures (CPMI), would complement the margin requirements developed by the BCBS and IOSCO in September 2013 in strengthening the non-centrally cleared OTC derivatives market.

The proposed risk mitigation standards cover nine areas:

Standard 1: Scope of Coverage

Standard 2: Trading Relationship Documentation

Standard 3: Trade Confirmation

Standard 4: Valuation with Counterparties

Standard 5: Reconciliation

Standard 6: Portfolio Compression

Standard 7: Dispute Resolution

Standard 8: Implementation

Standard 9: Cross-border Transactions

Comments on the proposals should be submitted on or before 17 October 2014.