Optimizing the Compression Cycle: Algorithms for Multilateral Netting in OTC Derivatives Markets

2013 ◽  
Author(s):  
Dominic O'Kane
Keyword(s):  
Otc Derivatives ◽  
Compression Cycle ◽  
Derivatives Markets

The Politics and Practices of Central Clearing in OTC Derivatives Markets

2018 ◽  
Author(s):  
Erin Lockwood
Keyword(s):  
Financial Markets ◽  
Unintended Consequences ◽  
Regulatory Change ◽  
Significant Shift ◽  
Risk Modeling ◽  
Risk Models ◽  
Over The Counter ◽  
Otc Derivatives ◽  
Derivatives Markets ◽  
Policy Shifts

This chapter focuses on the unintended consequences of the post-crisis mandate that over-the-counter (OTC) derivatives be cleared through centralized clearinghouses in an effort to reduce counterparty and systemic risk. Although central clearing has been widely implemented, it has reproduced many of the same characteristics of financial markets that contributed to the 2008 crisis: concentrated risk, moral hazard, and a reliance on faulty risk models. What accounts for the recalcitrance of the OTC derivatives market to a regulatory change? The chapter argues that focusing on the technologies and practices used to govern derivatives markets helps explain the absence of more radical regulatory policy shifts in derivatives regulation. Although there has been a significant shift in who regulates OTC markets, much less has changed at the level of the specific practices that govern these markets, and the chapter examines the continued reliance on netting, collateralization, and risk modeling within clearinghouses.

Regulate in Haste, Repent at Leisure: Private and Public Orderings in OTC Derivatives Markets

2020 ◽  
Author(s):  
Craig Pirrong
Keyword(s):  
Financial Crisis ◽  
Functional Approach ◽  
Over The Counter ◽  
Otc Derivatives ◽  
Private And Public ◽  
Derivatives Markets

Over-the-counter derivatives were widely blamed for causing or exacerbating the financial crisis. As a result of perceived structural failings in these markets, legislators and regulators mandated substantial changes. The most notable of these changes was a requirement that most derivatives be centrally cleared. Under clearing, a central counterparty becomes a party to all contracts and guarantees performance on them. These mandates were predicated on a defective understanding of the economics of derivatives markets. The proposed reforms were fundamentally flawed because they were rooted in an institutional, rather than functional, approach to regulation.

‘Targeted Touchdown’ and ‘Partial Liftoff’: Post-Crisis Dispute Resolution in the OTC Derivatives Markets and the Challenge for ISDA*

2012 ◽  
Vol 13 (12) ◽  
pp. 1297-1328 ◽  
Author(s):  
John Biggins
Keyword(s):  
Dispute Resolution ◽  
Trade Association ◽  
Regulatory Regime ◽  
Over The Counter ◽  
Otc Derivatives ◽  
The Creation ◽  
Derivatives Markets

Since the 1980s, influential participants in the niche over-the-counter (OTC) derivatives markets have sought to encourage contractual standardization in the industry to mitigate the potential for unforeseen legal interruptions and ensure the enforceability of OTC derivatives contracts. The International Swaps and Derivatives Association (ISDA), a trade association and standard-setter, has spearheaded this effort; resulting in the creation and sustenance of a highly successful transnational private regulatory regime (TPRER). Most notably, ISDA has generated a standardized boilerplate contract for OTC derivatives, known as the ‘ISDA Master Agreement’. However, the TPRER within which the ISDA Master Agreement operates displays some intriguing features and paradoxes. Chief amongst these paradoxes is that, while this TPRER appears at first glance to be highly legalistic and formal, indications are that rates of formal litigation between members of the regulatory regime have traditionally been low relative to the size of the market (the total notional amount of OTC derivatives contracts outstanding at the end of 2011 was estimated at US$648 trillion).

Emerging Trends of Derivative Trading In India

1970 ◽  
Vol 4 (2) ◽  
pp. 199-218
Author(s):  
Rajkumar ◽  
Priyanka Sharma
Keyword(s):  
Emerging Market ◽  
Forward Rate ◽  
Stock Exchanges ◽  
Business Growth ◽  
Otc Derivatives ◽  
Price Signals ◽  
Emerging Trends ◽  
Interest Rate Swaps ◽  
Reducing Costs ◽  
Derivatives Markets

Derivatives markets generally are an integral part of capital markets in developed as well as in emerging market economies. These instruments assist business growth by disseminating effective price signals concerning exchange rates, indices and reference rates or other assets and thereby render both cash and derivatives markets more efficient. These instruments also offer protection from possible adverse market movements and can be used to manage or offset exposures by hedging or shifting risks particularly during periods of volatility thereby reducing costs. By allowing for the transfer of unwanted risk, derivatives can promote more efficient allocation of capital across the economy, increasing productivity in the economy. Though the commodity features trading has been in existence since 1953 and certain OTC derivatives such as Forward Rate Agreements (FRAs) and Interest Rate Swaps (IRSs) were allowed by RBI through its guidelines in 1999, the trading in "securities" based derivatives on stock exchanges was permitted only in June 2000. The discussion that follows is mainly focused on "securities" based derivatives on stock exchanges.

scholarly journals Entry and Exit in OTC Derivatives Markets

Econometrica ◽  
2015 ◽  
Vol 83 (6) ◽  
pp. 2231-2292 ◽  
Author(s):  
Andrew G. Atkeson ◽  
Andrea L. Eisfeldt ◽  
Pierre-Olivier Weill
Keyword(s):  
Entry And Exit ◽  
Otc Derivatives ◽  
Derivatives Markets

Global Markets, National Toolkits

2018 ◽  
Author(s):  
Matthew Gravelle ◽  
Stefano Pagliari
Keyword(s):  
United States ◽  
European Union ◽  
The United States ◽  
Global Markets ◽  
The European Union ◽  
Regulatory Oversight ◽  
Land Grab ◽  
Regulatory Authorities ◽  
Otc Derivatives ◽  
Derivatives Markets

A key trend that has characterized implementation of the international agenda to regulate derivatives has been the emergence of a number of disputes over the territorial scope of regulation, as different countries have sought to extend their regulatory oversight over firms and markets that are not legally domiciled in their jurisdiction. What explains the emergence and continuation of these extraterritorial measures in the regulation of global OTC derivatives markets? This chapter addresses this question by exploring the “regulatory land grab” that has characterized the rules introduced in the United States and the European Union to regulate foreign dealers, CCPs, and trading venues. This chapter will argue that the different degrees of extraterritoriality that have emerged in the post-crisis agenda reflect the challenges that regulatory authorities have faced to implement the new prudential agenda in a manner that addresses the highly internationalized nature of derivatives markets.

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