NO 245 – JULY 2013

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Regulation

CFTC and European Commission reach common path forward on derivatives

The US Commodity Futures Trading Commission and the European Commission have reached a Path Forward regarding their joint understandings on a package of measures for how to approach cross-border derivatives. The Path Forward responds to the G20 commitment to lower risk and promote transparency on OTC derivatives markets which were are at the heart of the financial crisis. The CFTC and the European Commission share a common objective of a steadfast and rigorous implementation of these commitments. Close legislative and regulatory coordination and cooperation between the European Commission and the CFTC have ensured that the rules in place pursue the same objectives and generate the same outcomes. As a result of the joint collaborative effort, in many places, final rules are essentially identical, even though the regulatory calendars are not always synchronized.

IOSCO publishes principles for regulation of ETFs

On 24 June 2013, the Board of the International Organization of Securities Commissions published the final report on Principles for the Regulation of ETFs, containing nine important principles intended to guide the regulation of ETFs and foster industry best practices in relation to these products. The report is structured in two main sections. The first section concerns ETF classification and relevant disclosures for investors, including principles intended to clearly differentiate ETFs from other non-CIS ETPs. Further principles encourage the disclosure of related fees and expenses, including the eventual impact of securities lending on these, as well as complete and accurate disclosure to address the types of risks investors may be exposed to particularly through ETFs using complex strategies. The second section addresses concerns tied to the structuring of ETFs as such, including the management of potential inherent conflicts of interest and of counterparty risks arising from the two main types of replication methods: physical and synthetic. IOSCO encourages regulators to consider imposing requirements to ensure that ETFs appropriately address risks raised by counterparty exposure and collateral management.

Tokyo Stock Exchange and Osaka Securities Exchange develop derivatives markets rules

In connection with the merger of the derivatives markets of the Tokyo Stock Exchange and Osaka Securities Exchange, the Tokyo Stock Exchange has recently published the trading rules to be effective after this integration has taken place in March 2014, following the integration of the cash markets on 15 July 2013.