Alternative Investment Management Association Representing the global hedge fund industry
28 May 2013
The Alternative Investment Management Association (AIMA), the global hedge fund industry association, has produced a paper that highlights the key areas where deeper coordination of over-the-counter (OTC) derivatives regulation is required to achieve the G20 objective of maintaining global markets.
The paper, ‘Addressing overlaps between EMIR and CFTC OTC derivatives regulation’, provides examples of potential regulatory conflicts or unnecessary overlap between the European Markets Infrastructure Regulation (EMIR) and the CFTC’s derivatives rules in a number of key areas including clearing obligations, reporting obligations, segregation rules, collateral rules and margin requirements.
AIMA said in the paper that, if untreated, some of the conflicting rules may prevent counterparties from complying with either regime, leading to market fragmentation along geographical boundaries. AIMA said these effects could be mitigated for cross-border transactions by firms being allowed to follow the rules of the jurisdiction of one, rather than both counterparties to a transaction under a concept known as ‘substituted compliance’ in the US or ‘equivalence’ in the EU.
In the US and Europe, the CFTC, the US Securities and Exchange Commission and the European Commission, respectively, will soon determine the scope of their derivatives regulatory regime with respect to cross-border transactions. These decisions which will address the scope of substituted compliance and equivalence recognition will have a significant impact on the nature of the global derivatives market.
Andrew Baker, AIMA CEO, said: “AIMA strongly supports efforts to promote central clearing of OTC derivatives and to reduce systemic risk, and we appreciate the difficult task that regulators in each jurisdiction face in completing their separate OTC derivatives regulations in a prompt and thorough manner, while also ensuring that those regulations are, as far as possible, consistent with regulations being finalised and implemented by other regulatory authorities.
“However, we are concerned that OTC derivatives transactions could be subject to unnecessarily duplicative – or even conflicting – requirements as a result of extra-territorial application of domestic rules. The good news is that the regulatory authorities have the tools at their disposal to ensure we avoid market fragmentation and they are mindful of some of the potential negative consequences of uncoordinated action. We hope that, by highlighting the key examples of potential problems, our paper contributes to the current intensive international regulatory dialogue.”
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Notes for Editors
The AIMA paper, ‘Addressing overlaps between EMIR and CFTC OTC derivatives regulation’ can be downloaded here:
For media enquiries, please contact Dominic Tonner, AIMA’s Associate Director, Communications. Tel: +44 (0)20 7822 8380; Email: email@example.com
As the global hedge fund association, the Alternative Investment Management Association (AIMA) has over 1,300 corporate members (with over 6,000 individual contacts) worldwide, based in over 50 countries.
Members include hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms, investors, fund administrators and independent fund directors. They all benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals and its excellent reputation with regulators worldwide.
AIMA is a dynamic organisation that reflects its members’ interests and provides them with a vibrant global network. AIMA is committed to developing industry skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the industry’s first and only specialised educational standard for alternative investment specialists. For further information, please visit AIMA’s website, www.aima.org.