OTC Derivatives to be Regulated in South Africa

OTC Derivatives to be Regulated in South Africa

According to Business Day, the South African authorities have made progress in developing and creating a system of regulation for over-the-counter (OTC) derivatives. In a report that promotes financial stability globally, obtained by Business Day, many of the details of the reforms are yet to be finalized.

Adoption by Parliament of the Financial Markets Act has allowed for the first steps toward regulation of the OTC derivatives market in South Africa, Final Regulations are still required for this act to be implemented.

Financial Stability Board on South African Derivatives

Released by the Treasury this week, the Financial Stability Board indicated in a peer review report on South Africa, that current drafts of the regulations would require providers of OTC derivatives to report all OTC transactions. This would not apply to corporate end users. In a quote obtained by Business Day, the board stated that, “The authorities expect this reporting obligation may be implemented across contract types in a phrased manner.”

Preliminary Estimates

As a signatory to the Group of 20, South Africa is obliged to implement its commitments on trading clearing and reporting of contracts. Early estimates of the size of domestic OTC derivatives market suggest that at end the end of June last year, it had a notional value of R27.7 trillion. Nearly R24-trillion (85% was in interest rate contracts, while about R3.3-trillion was in foreign exchange-related contracts.

According to Business Day, the board said authorities were concerned about the cross-border effect the proposed reforms would have on other jurisdictions. The Treasury will engage with the Department of Trade and Industry, under which the National Credit Regulator currently falls, on the best way to proceed.

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About The Author


Felix Shipkevich

Felix Shipkevich

Mr. Shipkevich’s practice focuses on regulatory, transactional, and enforcement matters in the fields of futures, commodities, and derivatives. He works with Futures Commission Merchants (FCMs), Retail Forex Exchange Dealers (RFEDs), Introducing Brokers (IBs), Commodity Pool Operators (CPOs), Commodity Trading Advisors (CTAs), Swap Dealers (SDs), Swap Execution Facilities (SEFs), and domestic and offshore hedge funds. Mr. Shipkevich guides clients on procedures related to registration with the U.S. Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), as well as domestic and international regulators in local jurisdictions. Mr. Shipkevich prepares and helps implement compliance, anti-money laundering (AML), and Electronic Trading Systems (ETS) procedures for clients in the commodities and derivatives fields.

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