IMA expresses concerns on OTC derivatives plans

The UK’s Investment Management Association (IMA) has responded to new European Commission plans relating to over the counter (OTC) derivatives.

Under the proposals, contracts for the derivatives would be subject to a greater degree of central standardisation.

Tighter controls might also be imposed on the clearing of trades and the outstanding position of traders.

These changes are aimed at lessening risk levels in the markets, in the wake of the collapse of US investment house Lehman Brothers in 2008.

The issue was subject to a consultation which ended last month - and the IMA’s comments form part of its submission to Brussels.

Jane Lowe, director of markets at the organisation, said: ’We welcome the commission’s proposals to promote the clearing and settlement of OTC derivative contracts in central clearing houses.

’This will allow for better counterparty and collateral risk management; and greater certainty and speed of action in the event of a counterparty default.’

Ms Lowe added that the current plans left ’scope’ for the emergence of ’monopolistic structures’ in future - and that clearing houses might also become vulnerable to ’inappropriate shareholder and stakeholder influences’.ADNFCR-2318-ID-19344380-ADNFCR