More FX derivatives reporting?

G20 Urged to Remove Restrictions on Reporting of Some Derivatives

The regulator has not specifically outlined foreign exchange derivatives for now.

The Financial Stability Board (FSB), a global banking regulator has urged G20 leaders to take charge of financial regulatory mechanisms and singled out derivatives transactions reporting as a sector where more regulatory action is necessary. With the upcoming meeting of global leaders set for for next week in China, a set of new financial regulations is being suggested for discussion.

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The removal of regulatory reporting exemptions on some derivative transactions has been the key takeaway from the list of recommendations made to the leaders of the G20. The FSB has also pleaded for more legal mechanisms that allow for closer cross-border cooperation enabling data sharing.

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While foreign exchange derivatives have not been singled out by the regulators, reporting of FX options, currency swaps, and non-deliverable forwards is currently exempted from the reporting to national data repositories. The move by the FSB could well aim to change the current status quo, which for example allows for Chinese yuan traders to accumulate positions in the open market that are not publicly known in size.

Global financial reports are one of the the key areas of focus for the FSB. The banking regulator has outlined that it needs more resources in order to remove “legal data and capacity constraints”.

According to the organization, the main way in which such constraints can be removed is for governments to provide additional resources for the national regulators.

Commenting on the report, which the FSB presented to G20 leaders for discussion, Mark Carney, the Bank of England’s governor and FSB chair, explained that the priorities of the regulator should be to make sure that past agreements have been fully implemented and are tackling new risks and vulnerabilities.

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