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FSB Issues Review of Mexico’s OTC Derivatives Reforms

The Financial Stability Board (FSB) today published its peer review of Mexico, which examined the implementation of the G20 commitments on over-the-counter (OTC) derivatives.

Mexico’s OTC derivatives market is relatively small from a global perspective, but is the largest in Latin America. The market has a substantial cross-border component, with foreign banks being important players, the report notes. Interest rate derivatives are the predominant asset class as measured by notional amount outstanding, while foreign exchange trades dominate daily turnover.

The peer review finds that the Mexican financial authorities have made good overall progress in their implementation of OTC derivatives reforms. Mexico does not have a specific law dedicated to regulating OTC derivatives markets, but the authorities in recent years undertook several initiatives to enhance rules and procedures in this area. These include implementing comprehensive requirements for trade reporting, central clearing and platform trading, with a strong focus on quality, public transparency, and analysis of trade repository (TR) data. The authorities have advanced these reforms in a thoughtful, collaborative and proactive manner, the study finds.

Notwithstanding these achievements, the review concludes that further steps can be taken by:

completing implementation of remaining OTC derivatives reforms on a timely basis, including margin and final capital requirements for non-centrally cleared derivatives; expanding the authority of the National Banking and Securities Commission (CNBV) for aspects of the supervision and enforcement of conduct of market participants; and expanding the scope and sharing of TR data, including by removing barriers to full reporting of Mexican TR data to foreign TRs.

The peer review report includes recommendations to the Mexican financial authorities in order to address these issues. It says these steps should be supported by efforts to ensure that the authorities – particularly the CNBV – have adequate resources and powers to fulfil current and potentially expanded OTC derivatives-related responsibilities.

jros@profit-loss.com

@jros66

Julie Ros

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