Clearing OTC derivatives: the Dodd-Frank Act and the new EU Regulation

The European Commission’s proposal for a new EU regulation (titled the European Market Infrastructure Regulation) on OTC derivatives, central counterparties and trade repositories (EU Regulation) was published on 15 September 2010, precisely two years after the commencement of the Lehman Brothers bankruptcy. The EU Regulation is designed to meet the commitment by the G20 leaders in September 2009 that all standardised OTC derivatives contracts should be cleared through Central Counterparty Clearinghouses (CCPs), by the end of 2012 at the latest. It also provides for reporting of OTC derivatives contracts to trade repositories, and creates a framework for the regulation of CCPs and trade repositories in the EU. The anniversary of the commencement of the Lehman Brothers bankruptcy is particularly relevant, since the EU Regulation seeks to reduce systemic risk in derivatives markets.