Firms that are more established in the world of OTC derivatives have a lot to lose.
Even so, exchanges would eat into banks' trading profitability by making prices more widely available to buyers of OTC derivatives.
ECONOMIST: Derivatives: Over the counter, out of sight | The
All cleared OTC derivatives will be available including interest rate swaps, credit default swaps, energy swaps, non-deliverable forwards and equity swaps.
More than 60 organizations from both buy-side and sell-side firms involved in futures and OTC derivatives provided input to develop this document.
FORBES: FIA and ISDA Publish Documentation for Cleared Swaps
My job was to effect hedge positions for the government bond trading desk, the currency trading desk and the OTC derivatives desk.
We have yet to complete the reforms needed to raise capital standards, improve liquidity, reform the securitisation process and regulate the OTC derivatives market.
In the fourth such meeting on the topic Monday, members of the Fed's "OTC derivatives industry working group" agreed to register their trades with a computerized system for immediate recording.
The new regulation is a part of the Dodd-Frank financial reform act, under which the Commodity Futures Trading Commission (CFTC) proposed rules for how OTC derivatives clearing houses should be regulated.
For example, since September 2005, the Federal Reserve Bank of New York has been leading a joint public-private initiative to improve arrangements for clearing and settling trades in credit default swaps and other OTC derivatives.
During the financial crisis, the credit default swap (CDS) market, a part of the OTC derivatives market, took center stage as difficulties in financial markets began to intensify and the counterparty risk involved in a largely bilaterally cleared market became apparent.
Expect them to bog down quickly on how to regulate of the multitrillion-dollar market for OTC derivatives, which operate outside the direct reach of regulators and are partly to blame for the financial crisis having felled American International Group, one of the largest U.S. financial companies, and Lehman Brothers.
Using unique alphanumeric identifiers for financial firms would improve OTC derivatives markets, make it easier for regulators to see aggregated risk, and, once systems were changed over, would simplify record keeping, improve operational efficiency for firms and eliminate a lot of reconciliation work, according to a report the BIS issued from the Committee on Payment and Settlement Systems and the Technical Committee of IOSCO.
FORBES: BIS and IOSCO Dither on Requiring Legal Entity Identifiers (LEI)
The CFTC temporarily provides a broad exemption for over-the-counter (OTC) derivatives trading so the market can continue to operate as usual until regulators complete the new rules.
Registered as an Exempt Board of Trade (EBOT) for swaps and other OTC cleared derivatives, TeraExchange intends to apply to become a Swaps Execution Facility (SEF) once SEC and CFTC rules are finalized in early 2012.
Although not an extraordinarily large company by many metrics, Bear Stearns was deeply involved in a number of critical markets, including (as I have noted) markets for short-term secured funding as well as those for over-the-counter (OTC) derivatives.
Exchanges such as CME Group, Nasdaq OMX and NYSE Euronext are lined up to get a piece of the over-the-counter (OTC) derivatives market as new regulations will require derivatives trading to go through exchanges and be cleared through clearing houses.
Organized trading facilities in Europe, like Swap Execution Facilities (SEF) in the US, will bring over the counter derivatives (OTC) out blinking into the light.
FORBES: New Financial Regulations -- Profitable Opportunities, For Vendors
Applying the tax to derivatives and to OTC transactions, most of which will move to centralized clearing, would be more difficult but would raise much larger sums.
The global head of equity and derivatives for BNP Paribas (other-otc: BNPQY - news - people ), Yann Gerardin, told Forbes.com on Wednesday that its latest acquisition-- Bank of America (nyse: BAC - news - people )'s equity prime brokerage unit--would give the bank an attractive springboard into the lucrative American market.
So the loophole: in its treatise on derivatives, Congress left out a market: OTC equity options.
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