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Central clearing in the equity derivatives market 

June 12, 2014
ISDA

The approval of the first central counterparties under the European Market Infrastructure Regulation has focused attention on how a clearing determination will be applied across the European Union. This paper outlines the composition of the equity derivatives market and the extent of central clearing today, as well as the criteria that should be assessed when determining whether a clearing mandate should apply in the EU. In addition, the paper examines whether the liquidity of the underlying reference share – proposed by ESMA as a possible method of defining a class of product – is appropriate for clearing mandate determinations.

The Conclusion of the study states: 

The equity derivatives market is uniquely varied in terms of the factors that influence investment and hedging decisions. It is important to understand the different product characteristics, as well as how standardized, exchange-traded futures and options contracts differ from the highly customized contracts traded in the OTC market.

Read more: Futures Mag

 
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