Yesterday CME shared a paper on the famous OTC derivatives and their treatment under Extraterritoriality. Due to the role of unregulated over-the-counter (OTC) financial derivatives in the 2008 financial crisis which began in the U.S. but whose influence was felt globally, the G-20 agreed in its Pittsburgh meeting in 2009 that “all standardised OTC derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties by end-2012, at the latest. OTC derivative contracts should be reported to trade repositories. Non-centrally cleared contracts should be subject to higher capital requirements.”
The members of the G-20, in varying degrees and at different speeds, have embarked in their own jurisdictions to reform the OTC derivatives market. Given the interconnected nature of these markets, international cooperation has very much been part of crafting derivatives financial regulation.
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At the annual general meeting of the International Swaps and Derivatives Association in Singapore concluded
yesterday,a group of panelists highlighted the lack of clarity over resolution for failed Central counterparty (CCPs) as a significant concern for the G20 objectives of eliminating systemic risk.
Central counterparty clearers stand to be the next “too-big-to-fail” institutions and could pose an acute threat to the
financial system if regulators stall on plans to manage the potential failure of a clearing entity.
There are two main processes that are carried out by CCPs: View full article »
Jon, posting at the OTC space, does a nice job of setting out the size of various markets. In particular he uses gross
market value rather than notional for OTCs, which is a (much) more useful measure. The results are interesting:
Scarcely a day goes by without a press article or speech mentioning in its introduction the “more $600+ trillion OTC derivatives market”. Whilst this may liven up the subject, this unnecessarily inflames concern. Here’s why.
What are the figures? The quoted figures come from the Bank for International Settlements (BIS) half yearly reporting on OTC derivatives market activity – published on their website. The latest is: BIS OTC 2012 H1 which notes $639 trillion open notional. View full article »
Well its the last day of the month and the world economy standing in the mid of year 2012. Lets try to pull the events by connecting the dots and see where the world is :
1) After months weeks years of posturing and denial Spain and Cyprus formally requested aid from Europe bailout funds. More so they have officially confessed to their insolvency and the insolvency of their banking system.
Spain 10 year bond yield breached the worst level and it touched the 7% in return many od the Spain bank ratings got junk by Moodys
2) Over in the US, the city of Stockton, California filed for bankruptcy this week… View full article »
Yesterday I was going through a very interesting piece delivered by Jaime Caruana . General manager of the Bank for International Settlements (BIS) and he also hold the position in the past to be a former governor of Bank of Spain.
Well the message from the report of BIS is very clear that not enough being done to repair finances of Banks & Governments – cheap central-bank money props up the lame ducks. Another major remark from BIS View full article »