Guidelines knock global derivatives into shape

A set of guidance principles that could revolutionise the global derivatives market was published last week (10 July), ahead of the Financial Services Authority (FSA) report on the matter, which is expected soon.

The principles, which address how retail structure products (RSPs) are delivered to retail investors, were devised following an 18-month discussion period between market participants.

The principles have been set out by a working group made up of a coalition of five industry organisations, including the International Swaps and Derivatives Association (ISDA).

Chairman of the joint associations’ working group and JPMorgan managing director Tim Hailes said: “The issues surrounding how you distribute RSPs have been knocking on the door of the regulators and market participants for some time. Now these issues are banging on the door.”

Hailes added that, while some national regulators have analysed the distribution of RSPs in the past, these principles are the result of global research on the topic.

“Regulators have turned to these issues. The FSA, the AMF [Autorité des Marches] in Paris and and the SFC [Securities and Futures Commission] in Hong Kong, as well as the Securities and Exchange Commission, have all focused on RSPs to some extent. We’re confident that the global principles will influence these products worldwide,” Hailes said.

A diverse group of market participants contributed to the consultation period for the final draft of the principles.

Hailes said: “The substance of the principles didn’t alter as a result of the consultation process. The feedback concentrated on ensuring that the message was clear and unambiguous.

“Asking a group of lawyers from all corners of the globe to agree on the drafting can come to resemble the herding of cats.”