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FRM Part I · FRM Exam Part I · Exchanges and OTC Markets

Following the 2007-2009 crisis, G20 leaders agreed to reforms for over-the-counter derivatives markets. Which of the following was a core element of the agreed reform package for standardized OTC derivatives?

The G20 reforms required standardized OTC derivatives to be traded on exchanges or electronic platforms and cleared through central counterparties, with trades reported to trade repositories. This increases transparency and reduces counterparty risk. It did not ban corporate use, prohibit netting, or keep trade data confidential.

  1. AStandardized contracts should be traded on exchanges or electronic trading platforms and cleared through central counterpartiesCorrect
  2. BAll OTC derivatives should be banned for non-financial corporations
  3. CBilateral netting agreements should be prohibited between dealers
  4. DTrade details should be kept confidential between counterparties and never reported to any repository

Explanation

The G20 reforms called for standardized OTC derivatives to be traded on exchanges or electronic platforms where appropriate, cleared through CCPs, and reported to trade repositories. The other options contradict this: derivatives were not banned for corporates, netting was not prohibited, and reporting to repositories was required.

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