The world’s derivatives exchanges must have been rubbing their hands in glee in September 2009 when the G-20 leaders in Pittsburgh agreed that: “All standardised over-the-counter [OTC] derivatives contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties by end-2012 at the latest.”
Two years on, two regulations – the Dodd-Frank Act and the European Market Infrastructure Regulation (EMIR) – regulate the mandatory clearing of eligible OTC contracts, which for the foreign exchange (FX) industry means FX options and non-deliverable forwards (NDFs), through central counterparty clearing houses (CCPs). Further regulation will define the swap execution facilities (SEFs) required for executing OTC contracts.
