IOSCO have published their final document on the risk mitigation standards to be applied to non-cleared OTC derivatives, which can be found here.
The document addresses the risk mitigation measures, in addition to margin, that are desired to reduce risk, and most of which were addressed in the EU as part of EMIR, i.e.:
– Dispute resolution procedures
– Portfolio reconciliation
– Portfolio compression
– Timely confirmation
The standards also address documentation and cross border issues. The objective is that all jurisdictions meet the standards set out here to avoid regulatory arbitrage.
The document at this level is aimed at financial counterparties and “systemically important” non financial counterparties. As such it may not apply to a large number of energy and commodities companies. In the EU however, EMIR is quite specific about how most of the principles apply to FCs, NFC+s and NFC-s. In addition MiFID II is likely to re classify many in commodities and energy as FC.
As the report indicates, the EU and US have addressed many of these requirements through specific legislation, and as such the target could be considered to be other jurisdictions. We can therefore expect to see specific rules in many other countries.