19/8/2010
By Sophie Baker
The Alternative Investment Management Association (AIMA) is urging European Union policymakers to move ahead with reforms relating to over-the-counter (OTC) derivatives, as the benefits will outweigh increased costs.
AIMA has already submitted a response to the European Commission’s Consultation on Derivatives and Market Infrastructures, and said in relation to the OTC reforms, objectives that were outlined by the G20 should be implemented.
All OTC derivative contracts, according to the G20, should be reported to trade repositories, and all standardised contracts should be cleared through central counterparties (CCPs), traded where appropriate on an exchange or electronic trading platform.
The EC’s move towards mandating central clearing of eligible contracts was welcomed by AIMA, and has submitted suggestions for harmonised requirements for the establishment and operation of CCPs and trade repositories.
Hedge fund managers, which are significant users of OTC derivatives for investment and hedging purposes, would be forced to deal with significant costs relating to administrative and operational changes should the reforms go ahead as they are, AIMA said.
“Managers recognise the need for such reforms and will continue to work closely with policymakers to ensure that reforms and new regulations are well thought-out, coordinated and give due consideration to all the parties active in the OTC derivatives market,” commented AIMA CEO Andrew Baker.
“This is one of the central pieces of the reform agenda leading to the reduction of systemic risk. If designed properly, all market participants will benefit. Moreover, the whole economy will benefit if the incidence and the impact of future market and financial instability is reduced. This is an important objective we all share.”
