The global umbrella group for securities regulators has formed a task force to coordinate regulation of over-the-counter derivatives markets.

The technical committee of the International Organization of Securities Commissions, which is the group’s policymaking body, has created the task force in order to coordinate securities and futures regulators’ efforts to develop greater oversight structures for OTC derivatives markets. The task force will be led by the US Securities and Exchange Commission, the US Commodity Futures Trading Commission, the UK Financial Services Authority, and the Securities and Exchange Board of India.

It will develop international standards for OTC derivatives regulation in the areas of clearing, trading, trade data collection and reporting, and the oversight of certain market participants; coordinate other international initiatives relating to OTC derivatives regulation; and, serve as a centralized group within IOSCO to consult and coordinate generally on issues relating to OTC derivatives regulation.

“IOSCO has identified the need for enhanced international coordination between securities regulators in order to support the global reform efforts currently underway regarding OTC derivatives regulation,” said Hans Hoogervorst, chairman of the technical committee, said in a release.

“Many jurisdictions are currently adopting legislation that provides securities and futures regulators with an important role in the regulation of the OTC derivatives markets. As regulators implement their new legislative mandates, close consultation with foreign counterparts and the development of consistent standards across jurisdictions with respect to OTC derivatives regulation could help to promote convergence among IOSCO members’ and other regulatory bodies regulations, reduce the potential for conflicts of law or regulatory arbitrage, and mitigate systemic risk,” he added.

The task force will first study exchange and electronic platform trading for derivatives to examine the benefits and the challenges associated with regulation to increase exchange and electronic trading. By July 2011, it will produce a report on data reporting in the OTC market.

The task force aims to issue a report in January 2012 setting out consistent international standards for OTC derivatives regulation.

IE