The financial crisis highlighted that the lack of transparency on the markets for derivatives traded over the counter (so-called OTC derivatives markets) can threaten the stability of the entire financial system due to their strong international integration and the heavy trading volume and default risks. Since then, international efforts have been afoot, in particular undertaken by the G20 and the Financial Stability Board (FSB), to improve transparency and stability in the OTC derivatives market.

The existing Swiss regulation of financial market infrastructure is no longer appropriate given the developments on the financial markets. Furthermore, it also no longer satisfies the new standards developed by international bodies for important financial market infrastructure institutions such as trading platforms, central settlement offices, securities depositories or trade repositories.

International standards in the areas of OTC derivatives trading and financial market infrastructure are currently being implemented in national legislation in several countries. The EU and the United States in particular are relatively far advanced here.

To safeguard the competitiveness of the Swiss financial centre and to strengthen financial stability, it is necessary for Switzerland to implement the G20 obligations and the FSB recommendations on OTC derivatives trading as fully as possible and at the same time as other financial centres. In addition, regulation in the area of financial market infrastructure has to be adapted to international standards. In order to ensure the competitiveness of Swiss market players and market access in the EU, regulation equivalent to that of the EU is to be sought in both areas.

Remarks on the text:

In September 2009, the G20 countries committed themselves to the following by the end of 2012:
• to ensure that standardised OTC derivative transactions, if appropriate, will be traded via stock markets or other electronic platforms;
• to have standardised OTC derivative contracts cleared by central counterparties; and
• to ensure that all OTC derivative transactions are reported to trade repositories.
• In addition, bilaterally settled OTC derivative transactions should be subject to more stringent capital requirements.

The FSB has issued implementing recommendations and regularly examines these for its member states. Switzerland is a member of the FSB.

Federal Council wants better regulation of OTC derivatives trading and financial market infrastructure