Friday, November 14, 2008

PWG Initiatives on OTC Derivatives Oversight and Infrastructure

The President's Working Group on Financial Markets (PWG), comprised of the heads of the Treasury Department, the Federal Reserve, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, has announced a set of additional policy objectives to guide efforts to address challenges associated with over the counter (OTC) derivatives, consistent with the recommendations of the Financial Stability Forum, an international group of national financial authorities.  

In 2005, U.S. and foreign supervisors embarked on an effort to improve how market participants manage their OTC derivatives operations, which at the time had not matured sufficiently to support increased trading volumes. These efforts sought to enhance other elements of the market infrastructure, reduce systemic risk and address operational risks that have accompanied the growth of OTC derivatives.

In light of recent market developments, the PWG has issued a broader set of policy objectives than those that motivated the PWG's earlier recommendations.  The new PWG objectives seek to:
  1. improve the transparency and integrity of the credit default swaps market;

  2. enhance risk management of OTC derivatives;

  3. further strengthen the OTC derivatives market infrastructure; and

  4. strengthen cooperation among regulatory authorities.

The agencies in the PWG will work with other regulators and market participants to achieve these goals over the next several months. Where necessary, they will support legislative change.

The PWG's official statement is available at: