New York Fed Welcomes Further Industry Commitments on Over-the-Counter Derivatives

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Press Release

New York Fed Welcomes Further Industry Commitments on Over-the-Counter Derivatives

March 1, 2010

The Federal Reserve Bank of New York welcomes the letter released today by market participants outlining new commitments to bring greater transparency and standardization to over-the-counter (OTC) derivatives markets, implement collateral management best practices and further expand the use of central clearing in the credit and interest rate derivatives markets.

“We strongly support the market participants’ commitments toward increasing transparency and standardization in the OTC derivatives markets and look forward to meaningful progress in these areas. These are major regulatory priorities,” said William C. Dudley, president of the New York Fed.

Major commitments by the market participants include:

Market Transparency. The market participants will provide regulators with data and analysis to help evaluate how greater price transparency in the OTC derivatives markets might improve financial stability.

Central Clearing. The market participants will expand central clearing in both the credit and interest rate derivatives markets through expanding the range of supported products and effecting broader market participation in clearing.

Standardization. The market participants will work with supervisors to evaluate the levels of standardization in credit, equity, and interest rate derivatives products and processing and to prioritize the areas which would benefit from greater standardization.

Collateral Management. Following the development of best practices in collateralizing bilateral OTC derivative trades, the market participants have committed to implement these best practices to help reduce counterparty credit risk.

These commitments are consistent with the objectives set forth at the January 14, 2010 meeting between industry participants and domestic and foreign banking supervisors hosted by the New York Fed. The New York Fed will continue to work with supervisors to monitor the market participants’ efforts in meeting these commitments, and expects timely and substantial progress in all of these areas.

Participants' March 1 letter pdf
Summary of OTC Derivatives Commitments
March 1, 2010 pdf

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