On 17 May 2021, the International Organisation of Securities Commissions (IOSCO) published a speech by Ashley Alder (CEO Hong Kong Securities and Futures Commission and IOSCO chair) entitled A global perspective on derivatives regulation.

Key points in the speech include:

  • Global regulatory authorities are still monitoring the implementation and effectiveness of the post-crisis reforms in light of the real-life stress test when markets were affected by the so-called “dash for cash” last March.
  • The dash for cash triggered a renewed focus by regulators on potential structural vulnerabilities in non-bank financial intermediation.
  • IOSCO and the Financial Stability Board (FSB) are pursuing some very significant work streams including examining liquidity and redemption pressures in investment funds. At the moment the most advanced work stream is exploring policy options to address potential vulnerabilities in money market funds which could affect financial stability.
  • IOSCO has joined with the Committee on Payments and Markets Infrastructures (CPMI) and the Basel Committee on Banking Supervision (BCBS) to more closely examine the dynamics of margin calls in derivatives markets during the market turmoil last March and April. The study IOSCO is doing with the CPMI and BCBS will look at initial and variation margins in centrally cleared markets as well as in uncleared market
  • There are no international standards for the amount and composition of the financial resources to fund central counterparty recovery and resolution. The FSB issued guidance last year to help authorities determine whether there are any gaps in the adequacy of financial resources and the treatment of equity. However, the outstanding question is whether the CCP rule books provide sufficient incentives for all stakeholders to facilitate an orderly resolution. The FSB, CPMI and FSB are working to tackle this issue.
  • The BCBS-IOSCO margin requirements for non-centrally cleared derivatives are in the process of being implemented in stages, but with some delays. In the summer of 2019, full implementation was deferred by a year because of operational concerns and a further delay was announced a year later to cope with additional operational challenges posed by the COVID-19 pandemic. The final implementation phase is now scheduled for September 2022.
  • The Archegos incident provides a good opportunity to assess the degree to which trade repositories are achieving their original objectives. An assessment could cover any problems with data quality and the comparability and aggregation of information across different global trade repositories.

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