Paul Andrews, the new head of the International Organization of Securities Commissions, is planning to stake out positions on two issues of critical importance to the derivatives markets: equivalence determinations and the leverage ratio.
Speaking at the FIA's annual IDX conference in London on June 8, Andrews said IOSCO is focusing on setting more structure around the way equivalence determinations are made. He emphasized that IOSCO will not conduct the examinations, but rather issue guidance and standards for its member regulators. “I don’t think it will be easy, I don’t think it will be fast, but I think we can get there,“ he said, predicting that the guidance would be complete by the end of this year.
The issue of equivalence, which affects clearinghouses that operate across borders, is particularly pressing in Europe. European regulators have determined that the clearinghouse rules in several jurisdictions are equivalent to European standards, paving the way for clearinghouses in those jurisdictions to seek recognition in Europe. But several other jurisdictions have not yet been deemed equivalent, and in the case of the U.S., the equivalence determination covers rules issued by the Commodity Futures Trading Commission but not the Securities and Exchange Commission.
On the issue of the leverage ratio, Andrews noted that IOSCO had sent a letter expressing its concerns regarding the potential impact of the current leverage ratio. Andrews commented that if banks reduce their clearing services as a result of the leverage ratio, this would raise concerns about access to clearing and the portability of customer accounts and margin in the event of a clearing member default. He urged members of the industry to provide data to the Basel Committee to support their concerns during the Basel consultation on the leverage ratio.
“What we have encouraged our members and the clearing members in particular to do is to write to the Basel Committee with as much data as possible to help shift this debate," Andrews told the IDX audience. “What we will do is we will engage further with the Basel Committee,” he said.