Increased regulation of derivatives has been a key element of international efforts to strengthen the global financial regulatory framework. Following the bailout of AIG, primarily due to its massive exposure under credit default swaps, the initial focus of regulators was in relation to increased regulation of credit default swaps, including greater standardization of contract terms and more central clearing of standardized CDS contracts. Although there is little evidence that over-the-counter derivatives (“OTC derivatives”) were a material factor in the causes of the financial crisis, the focus moved quickly to OTC derivatives more generally, following the failure of Lehman Brothers with concerns over the interconnectedness of large financial institutions, and fears that the failure of a firm with large derivative positions had the potential to cause significant systemic problems to the global financial markets. In addition, concerns were raised that a lack of transparency meant that regulators and market participants did not have the information necessary to assess the full extent of parties’ exposures to each other.

In response to the crisis, the G-20 leaders made the following commitment in Pittsburgh in September 2009...