OTC Derivatives Market

Size is too simple a metric… It really doesn’t matter from a systemic point of view whether you have four banks or forty banks in a market. It’s813530 the system’s asset concentration – principally in government debt and in mortgage debt – that can be dangerous.”

Thought of sharing some Important glossary on the OTC Market as I was refreshing self on last night :

The Margin calls are coming big way

Some bankers sing this morning instead of ‘Purple Rain, Purple Rain’ – “Margin call, Margin call!”images

Last week’s biggest news is not the Nonfarm Payrolls, or the European Central Bank or even Portugal’s government falling. No – the big deal is the openness with which the Federal Reserve is preparing a major margin call on the too-big-to-fail banks in the US.

This has been a long time coming since the introduction of the Dodd-Frank law back in 2010 but it is a game changer. Remember all macro paradigm shifts come from policy impulses, often mistakes.

Fed approves step one in a three-step plan:   Continue reading “The Margin calls are coming big way”

OTC Derivatives Central Clearning & Dodd – Frank

Ready or Not ? Here it comes

Lot of Hedge funds and Investment banks have started publishing the margin FAQ’s after the Credit crisis. As part of Dodd-Frank, by the end of 2012, all standardised over-the-counter derivatives will have to be cleared through central counterparties.

That’s the biggest challenge for the market as OTC derivatives account for almost 95% of the derivatives markets. In June 2011, the notional value of outstanding OTC derivatives was around $707 trillion or €540 trillion. Continue reading “OTC Derivatives Central Clearning & Dodd – Frank”