search   Knowledge Bank printable version
 Knowledge Bank
 Deal Information
 Industry Events
 Advocacy Forums
 Site Utilities
 Free Offers

Click here to
Update Registration

Please be advised that the use of ®
is subject to the
Terms & Conditions

of use and the
Privacy Policy


Best viewed in

Knowledge Bank > Financial > General
Select an area

SIFMA Offers Framework for OTC Derivatives Risk Management
SIFMA - Securities Industry and Financial Markets Association (June 2, 2009)

Press Release
Release Date: June 2, 2009
Katrina Cavalli, (212) 313-1181,

SIFMA Offers Framework for OTC Derivatives Risk Management

New York, NY, June 2, 2009-The Asset Management Group of the Securities Industry and Financial Markets Association (SIFMA) today outlined a framework for over the counter (OTC) derivatives risk management and market structure. SIFMA, along with the senior managements of a group of dealers, asset managers and investors, offered the framework and reiterated its commitment to reducing systemic risk in the OTC derivatives market in a letter to the Federal Reserve Bank of New York. The group's initiatives offer a strong solution to the concerns raised by supervisors and legislators globally, notably the G20, the European Commission and the U.S. Department of Treasury.

"The industry is working towards a constructive, substantive approach to the regulation of over the counter derivatives," said SIFMA president and CEO Tim Ryan. "A cornerstone of this plan is the creation of a CDS clearinghouse, one of which has already begun to clear and settle CDS transactions, limiting the risk to the larger financial system of any one dealer failing to meet its obligations. This approach also facilitates regulators' ability to monitor firms' exposure to over the counter derivative products while simultaneously ensuring each firm holds the necessary collateral. In addition, Congress should provide for regulatory oversight of every systemically significant participant in the derivatives market, appointing a systemic risk regulator to ensure all of these firms are operating in a prudent manner."

The letter reiterates the group's commitment to reducing systemic risk in the over the counter derivative markets through the following:

  • Mechanisms at central counterparties to assure segregation of customer collateral and portability of accounts in the event of counterparty default.
  • Implementing data repositories for non-cleared transactions in these markets to ensure appropriate transparency and disclosure, and to assist global supervisors with oversight and surveillance activities.
  • Clearing for OTC standardized derivative products in these markets.
  • Enabling customer access to clearing through either direct access as a clearing member or via indirect access, including the benefits of initial margin segregation and position portability.
  • Delivering robust collateral and margining processes, including portfolio reconciliations, metrics on position and market value breaks, and improved dispute resolution mechanics.
  • Updating industry governance to be more inclusive of buy-side participants.
  • Continuing to drive improvement in industry infrastructure as well as to engage and partner with supervisors, globally, to expand upon the substantial improvements that have developed since 2005.

The Asset Management Group commits, for all trades to which the group's members are a party and which were not cleared through a CCP, to universal recording of trades in a trade repository. For CDS trades, the implementation date is July 17, 2009. Interest rate derivative trades will be recorded by December 31, 2009, and OTC equity derivative trades by July 31, 2010. In addition, the group is actively engaged in discussions with CCPs to broaden the range of cleared products and market participants. Products that will be added in 2009 include liquid single name CDS and overnight indexed swaps. Further products will be added in 2010, including tranche CDS.

The Securities Industry and Financial Markets Association brings together the shared interests of more than 600 securities firms, banks and asset managers. SIFMA's mission is to promote policies and practices that work to expand and perfect markets, foster the development of new products and services and create efficiencies for member firms, while preserving and enhancing the public's trust and confidence in the markets and the industry. SIFMA works to represent its members' interests locally and globally. It has offices in New York, Washington D.C., and London and its associated firm, the Asia Securities Industry and Financial Markets Association, is based in Hong Kong.

More SIFMA News

If you are a member of the media or have questions regarding SIFMA news and activities, please contact SIFMA Strategic Communications and Media Relations:

In Washington,

Travis Larson
(ph) 202.962.7300
(fx) 202.962.7305

Andrew DeSouza
(ph) 202.962.7300
(fx) 202.962.7305

In New York,

Katrina Cavalli
(ph) 212.313.1181
(fx) 212.313.1126



© Copyright 2014. The Mayer Brown Practices. All rights reserved.

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the “Mayer Brown Practices”). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. “Mayer Brown” and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

Legal Notices | Attorney Advertising | Site Index | Contact Webmaster

*The site links listed on this web site are for reference use only.
The firm does not necessarily sponsor, endorse or verify the accuracy of the content contained in any of these sites.