The Council adopted a regulation aimed at increasing transparency in derivatives and reducing risk in the over-the-counter (OTC) derivatives market. This adoption comes after the Council accepted all amendments voted by the Parliament at first reading on 3 July. This regulation is intended to implement commitments made by G-20 leaders in September 2009.

The regulation on derivatives was adopted by the Council on 4 of July. The main aim of this regulation is increasing transparency in derivatives and reducing risk in the over-the-counter (OTC) derivatives market. The OTC are derivatives not traded on an exchange but instead privately negotiated between two counterparts. MEPs adopted the legislation to make trade over-the-counter (OTC) derivatives safer and more transparent on March 2012.

The regulation requires the clearing of standardised OTC derivative contracts through central counterparties (CCPs) in order to reduce counterparty risk (i.e. the risk of default by one party to the contract). This is aimed at preventing the default of one market participant causing the collapse of other market players, thereby putting the entire financial system at risk. To be authorised, a CCP will have to hold a minimum amount of financial resources.

According to the Council, it specifically requires a CCP to have a mutualised default fund to which members of the CCP have to contribute the reporting of all derivative contracts to trade repositories (i.e. central data centres). Trade repositories would have to publish aggregate positions by class of derivatives, thereby offering market participants a clearer view of the derivatives market. Among other tasks, the European Securities and Markets Authority (ESMA) will be responsible for the surveillance of trade repositories and for granting and withdrawing their registration.