In a report forwarded to Congress Thursday, the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) said it was far too soon to determine whether there were no “gaps or inconsistencies” between the U.S. and international regulation of the multi-trillion dollar derivatives market.

“The G-20 leaders [representing the world’s 20 largest economies] have agreed to the OTC [over the counter] derivatives commitments, but it is still too early to determine precisely where there is alignment internationally,” the U.S. regulators told Congress in the more than 100-page report.

“Regulation of OTC derivatives has just begun. These markets are in transition — and our efforts to regulate them are evolving,” the report said. In 2009, G-20 leaders committed that all standardized derivatives would be be cleared and traded or exchanges on electronic platforms by the end of 2012.

Among the countries with major OTC derivatives markets, only the United States and Japan have adopted legislation in this area, although the European Union is nearing adoption of such legislation, according to the report. In addition, a few jurisdictions require some reporting of OTC derivatives transactions, and several jurisdictions have released “consultations” related to the regulation of OTC derivatives.

The Dodd-Frank Wall Street Reform Act, which was signed into law in 2010 in the United States, created four new categories of market participants and required registration of these participants, including swap dealers, major swap participants, securities-based swaps dealers and major security-based participants.

Dodd-Frank includes the requirements for capital, margin, risk management, segregation and liquidity. “Swaps entities will be required to comply with minimum capital and minimum initial and variations margin requirements. The FTC has proposed regulations in this area, and the SEC plans to propose regulations [this year],” the agencies told Congress.

“Both U.S. and EU [European Union] legislation include a carve-out for end-users that use OTC derivatives to hedge risk,” the agencies said.

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