OTC MARKET NEWS Powered By Quantifi

Regulators warn over-the-counter derivatives are out of control 

April 15, 2015

Jeremy Fleming, EurActive

EU and US industry and regulatory figures have warned that the number and nature of repositories listing over-the-counter (OTC) derivatives trades is threatening to blind regulators to market risk.

OTC trading is done directly between two parties, without any supervision of a stock exchange, in contrast with exchange trading.

Stock exchanges facilitate liquidity, help mitigate risk concerning the default of one party in the transaction, provide transparency and maintain a current market price. In an OTC trade, the price is not necessarily available to the public.

The collapse of Lehman Brothers in 2008 – which triggered the financial crisis – led to calls by the G20 in 2009 for the introduction of swap data depositories, in order to bring clarity to the OTC marketplace.

“To meet the G20 objective, The Depository Trust & Clearing Corporation (DTCC) [a US-headquartered global post-trade services provider] suggested the optimal model would be to establish one trade repository per asset class, providing a centralised point of access for regulators around the world,” said Larry Thompson, the DTCC’s vice chairman and general counsel told EurActiv in an interview.

Read more: EurActive

Comments are closed on this post.


Submit your email to receive our newsletter