The International Organization of Securities Commissions (IOSCO) has recommeded high-level international standards for the regulation of market participants that are in the business of dealing, making a market or intermediating transactions in over-the-counter (OTC) derivatives.
In its International Standards for Derivatives Market Intermediary Regulation report, published Tuesday , IOSCO said that these "derivatives market intermediaries (DMIs) often have not been subject to the same level of regulation as participants in the traditional securities market."
The international regulator believes that a lack of appropriate regulation allowed some DMIs to operate in a manner that created risks to the global economy that manifested during the financial crisis of 2008.
IOSCOs report intends to address DMI obligations that should help mitigate systemic risks; requirements intended to manage counterparty risk in the OTC derivatives markets; and protection for participants in the OTC derivatives markets from unfair, improper or fraudulent practices.
"Consistency among market authorities with respect to the regulation of DMIs is essential to the successful oversight of the global OTC derivatives market particularly because many DMIs operate in multiple jurisdictions," said IOSCO in the report.