Comparing G-20 Reform of the Over-the-Counter Derivatives Markets [February 19, 2013] [open pdf - 604KB]
"Derivatives, or financial instruments whose value is based on an underlying asset, played a key role in the financial crisis of 2008-2009. Congress directly addressed the governance of the derivatives markets through the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank; P.L. [Public Law] 111-203; July 21, 2010). This act, in Title VII, sought to bring the largely unregulated over-the-counter (OTC) derivatives markets under greater regulatory control and scrutiny. Pillars of this approach included mandating that certain OTC derivatives be subject to central clearing, such as through a clearinghouse, which involves posting margin to cover potential losses; greater transparency through trading on exchanges or exchange-like facilities; and reporting trades to a repository, among other reforms. In the debates over Dodd-Frank and in subsequent years, many in Congress have raised the following important questions: If the United States takes stronger regulatory action than other countries, will business in these OTC derivatives markets shift overseas? Since OTC derivatives markets are global in nature, could derivatives trading across borders, or business for U.S. financial firms that engage in these trades, be disrupted if other countries do not adopt similar regulatory frameworks? The first step in addressing these congressional concerns is to examine the degree to which other major countries have adopted similar legislation and regulation as the United States, particularly in light of commitments from the Group of Twenty nations (G-20) to adopt certain derivatives reforms. […] This report examines the G-20 recommendations for reforming OTC derivatives markets and presents the result of self-assessment surveys measuring the performance of G-20 members and some FSB [Financial Stability Board] members to date in meeting their commitments. The Appendix to the report presents more detailed information on the status of individual jurisdictions in implementing the G-20- endorsed reforms. The Glossary defines key international bodies and related financial terms and concepts."
CRS Report for Congress, R42961