Market Participants Commit to Expand Central Clearing for OTC Derivatives
( Federal Reserve Bank of New York )
(September 8, 2009)
The Federal Reserve Bank of New York today received commitments from 15 major over-the-counter (OTC) derivatives dealers setting specific target levels for expanding central clearing for OTC credit and interest rate derivatives.
The letter sets targets both for submitting new trades to central counterparties (CCPs) and for clearing historical trades. These targets will be increased over time as dealers improve their capacity to clear trades. In addition, the major dealers are agreeing today to report a broader set of data that will allow regulators to better monitor CCP usage.
"Over the last year, regulators have worked to increase OTC derivatives clearing in order to enhance the resilience of the financial system. These targets will push major dealers to accelerate their progress. We also expect them to work with central counterparties to rapidly expand the universe of eligible products and to continue to increase clearing levels beyond these initial targets," said New York Fed President William C. Dudley.
These commitments follow a June 2, 2009, letter from market participants to regulators in which market participants outlined a series of steps to expand the use of CCPs for OTC derivatives. Concurrent efforts include extending the risk reduction benefits of central clearing to buy-side market participants and expanding central clearing to cover a wider range of products.
Supervisors expect market participants to set increasingly stringent targets over time and to meet the December 15, 2009, customer clearing commitment set in the June letter. The New York Fed will continue to work with other domestic and international banking supervisors to monitor market progress on these objectives.
Participants' September 8 letter (PDF)
CDS appendix (PDF)
Rates appendix (PDF)
Contact: Deborah Kilroe