However, actions by investors in the derivatives markets likely aggravated the financial crisis, required billions in government assistance to American International Group, Inc. (AIG) and other financial firms to cover losses associated with credit default swaps (CDS), and played a key role in destabilizing financial markets. One of these first steps included "improving the infrastructure of over-the-counter" (OTC) derivative markets and credit default swaps. Assessing G-20 Derivatives Market Reforms

As indicated above, the FSB was tasked by the G-20 with monitoring and reporting on the success of G-20 nations in meeting the year-end 2012 deadline of implementing the OTC derivatives market reforms. As a result of self-assessments by G-20 members, except for France, Germany, and Italy, which are represented by the EU in the survey, and such FSB members as Singapore and Switzerland, the FSB offered four general conclusions: 
Only Japan and the United States had adopted the necessary legislation to reach the goal of having derivatives centrally cleared by the end of 2012, while the EU had reached a political consensus regarding legislation. Most authorities estimated that a significant proportion of interest rate derivatives will be centrally cleared by year-end 2012, but they were less confident of progress for other asset classes and could not make firm estimates when central clearing could be achieved. Progress : The FSB's October 2012 report indicated that the EU, Japan, Hong Kong, and the United States had taken significant steps towards implementing legislation that mandates central clearing of standardized OTC derivatives. Also, the FSB noted that in many jurisdictions, including the United States, Japan, and the EU, legislative changes must be followed up with more technical implementing regulations in order for the requirements to become fully effective. Progress : The FSB concluded in its October 2012 report that progress in enacting legislative and regulatory frameworks for implementing the commitment to trading standardized derivatives on exchanges and electronic platforms was markedly behind the progress made toward other commitments, that progress did not appear to be on track to meet the year-end 2012 deadline, and that the most important factor inhibiting the development of trading infrastructure was uncertainty over the regulatory framework. As of October 2012, only the United States had adopted legislation that requires standardized derivatives be traded on exchanges and electronic platforms. According to the FSB:
1. Issues for Congress

Congress has addressed directly the governance of the derivatives market through the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ). Conclusions

Following the financial crisis of 2008-2009, national leaders in the G-20 have spearheaded reforms in the rules and regulations governing the trading of financial instruments known as derivatives. As a result of a survey of the efforts made to date by G-20 members and some FSB members, the Financial Stability Board concluded in October 2012 that:
Regulators and derivatives market participants were struggling to meet their commitments to implement market reforms by the end of 2012. Individual Country Progress in Implementing Derivatives Market Reforms
This Appendix presents detailed information on the progress the G-20 members, except France, Germany, and Italy, which are represented by the European Union, and such FSB members as Singapore and Switzerland, have made in meeting the G-20 self-imposed deadline of adopting reform measures by year-end 2012. India is considering a phased in approach to bring any remaining OTC derivatives under the reporting framework. Transparency and Trading . Application to OTC derivatives trading is currently under review. Reporting to Trade Repositories. With adoption of the Dodd-Frank Act in July 2010, the United States has a law in force requiring all standardized OTC derivatives to be cleared through CCPs, according to the FSB assessment. The United States has completed a legislative step toward implementing a trading requirement for standardized derivatives, as the Dodd-Frank Act requires any swap or security-based swap subject to the clearing requirement to be traded on a registered trading platform, such as an exchange or swap execution facility registered with the CFTC, or security-based swap execution facility registered with the SEC.
Derivatives, or financial instruments whose value is based on an underlying asset, played a key role in the financial crisis of 2008-2009. Congress directly addressed the governance of the derivatives markets through the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank; P.L. 111-203; July 21, 2010). This act, in Title VII, sought to bring the largely unregulated over-the-counter (OTC) derivatives markets under greater regulatory control and scrutiny. Pillars of this approach included mandating that certain OTC derivatives be subject to central clearing, such as through a clearinghouse, which involves posting margin to cover potential losses; greater transparency through trading on exchanges or exchange-like facilities; and reporting trades to a repository, among other reforms.
In the debates over Dodd-Frank and in subsequent years, many in Congress have raised the following important questions: If the United States takes stronger regulatory action than other countries, will business in these OTC derivatives markets shift overseas? Since OTC derivatives markets are global in nature, could derivatives trading across borders, or business for U.S. financial firms that engage in these trades, be disrupted if other countries do not adopt similar regulatory frameworks? The first step in addressing these congressional concerns is to examine the degree to which other major countries have adopted similar legislation and regulation as the United States, particularly in light of commitments from the Group of Twenty nations (G-20) to adopt certain derivatives reforms.
Following the financial crisis, G-20 leaders (generally political heads of state) established a reform agenda and priorities within that agenda for regulating and overseeing OTC derivatives. The G-20 as an organization has no enforcement capabilities, but relies on the members themselves to implement reforms. According to recent surveys, most members are making progress in meeting the self-imposed goal of implementing major reforms in derivatives markets. Only the United States appears to have met all the reforms endorsed by the G-20 members within the desired timeframe of year-end 2012.
The European Union (EU), Japan, Hong Kong, and the United States have each taken significant steps towards implementing legislation requiring central clearing. However, in most of these jurisdictions legislation has not yet been followed up with technical implementing regulations for the requirements to become effective, according to the Financial Stability Board (FSB), which conducts the surveys. Most authorities surveyed estimated that a significant proportion of interest rate derivatives would be centrally cleared by year-end 2012, but they were less confident of progress for other asset classes. The EU appeared to be making progress in its G-20 derivatives regulatory commitments, particularly in central clearing and trade repository-reporting requirements, but at a slower pace than the United States, according to the FSB. This may be due in part to the need for legislation to be passed by individual national legislatures even when agreed broadly by the EU. As of October 2012, however, only the United States had adopted legislation requiring standardized derivatives to be traded on exchanges and electronic platforms.
This report examines the G-20 recommendations for reforming OTC derivatives markets and presents the result of self-assessment surveys measuring the performance of G-20 members and some FSB members to date in meeting their commitments. The Appendix to the report presents more detailed information on the status of individual jurisdictions in implementing the G-20-endorsed reforms. The Glossary defines key international bodies and related financial terms and concepts.