Off-exchange Derivatives Markets and Financial Fragility PDF Download
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Author: Franklin R. Edwards
Publisher:
ISBN:
Category : Derivative securities
Languages : en
Pages : 64
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Book Description
Author: Franklin R. Edwards
Publisher:
ISBN:
Category : Derivative securities
Languages : en
Pages : 64
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Book Description
Author: James K. Jackson
Publisher: Createspace Independent Pub
ISBN: 9781482762143
Category : Political Science
Languages : en
Pages : 58
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Book Description
Derivatives, or financial instruments whose value is based on an underlying asset, played a key role in the financial crisis of 2008-2009. Congress directly addressed the governance of the derivatives markets through the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank; P.L. 111-203; July 21, 2010). This Act, in Title VII, sought to bring the largely unregulated over-the-counter (OTC) derivatives markets under greater regulatory control and scrutiny. Pillars of this approach included mandating that certain OTC derivatives be subject to central clearing, such as through a clearinghouse, which involves posting margin to cover potential losses; greater transparency through trading on exchanges or exchange-like facilities; and reporting trades to a repository, among other reforms. In the debates over Dodd-Frank and in subsequent years, many in Congress have raised the following important questions: If the United States takes stronger regulatory action than other countries, will business in these OTC derivatives markets shift overseas? Since OTC derivatives markets are global in nature, could derivatives trading across borders, or business for U.S. financial firms that engage in these trades, be disrupted if other countries do not adopt similar regulatory frameworks? The first step in addressing these congressional concerns is to examine the degree to which other major countries have adopted similar legislation and regulation as the United States, particularly in light of commitments from the Group of Twenty nations (G-20) to adopt certain derivatives reforms. Following the financial crisis, G-20 leaders (generally political heads of state) established a reform agenda and priorities within that agenda for regulating and overseeing OTC derivatives. The G-20 as an organization has no enforcement capabilities, but relies on the members themselves to implement reforms. According to recent surveys, most members are making progress in meeting the self-imposed goal of implementing major reforms in derivatives markets. Only the United States appears to have met all the reforms endorsed by the G-20 members within the desired timeframe of year-end 2012. The European Union (EU), Japan, Hong Kong, and the United States have each taken significant steps towards implementing legislation requiring central clearing. However, in most of these jurisdictions legislation has not yet been followed up with technical implementing regulations for the requirements to become effective, according to the Financial Stability Board (FSB), which conducts the surveys. Most authorities surveyed estimated that a significant proportion of interest rate derivatives would be centrally cleared by year-end 2012, but they were less confident of progress for other asset classes. The EU appeared to be making progress in its G-20 derivatives regulatory commitments, particularly in central clearing and trade repository-reporting requirements, but at a slower pace than the United States, according to the FSB. This may be due in part to the need for legislation to be passed by individual national legislatures even when agreed broadly by the EU. As of October 2012, however, only the United States had adopted legislation requiring standardized derivatives to be traded on exchanges and electronic platforms. This report examines the G-20 recommendations for reforming OTC derivatives markets and presents the result of self-assessment surveys measuring the performance of G-20 members and some FSB members to date in meeting their commitments. The Appendix to the report presents more detailed information on the status of individual jurisdictions in implementing the G-20- endorsed reforms. The Glossary defines key international bodies and related financial terms and concepts.
Author: Eric C. Bettelheim
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 440
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Book Description
Author: Hau Harald
Publisher: International Monetary Fund
ISBN: 1498303773
Category : Business & Economics
Languages : en
Pages : 45
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Book Description
New regulatory data reveal extensive price discrimination against non-financial clients in the FX derivatives market. The client at the 90th percentile pays an effective spread of 0.5%, while the bottom quarter incur transaction costs of less than 0.02%. Consistent with models of search frictions in over-the-counter markets, dealers charge higher spreads to less sophisticated clients. However, price discrimination is eliminated when clients trade through multi-dealer request-for-quote platforms. We also document that dealers extract rents from captive clients and market opacity, but only for contracts negotiated bilaterally with unsophisticated clients.
Author: Group of Ten. Committee on Payment and Settlement Systems
Publisher:
ISBN:
Category : Clearing of securities
Languages : en
Pages : 80
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Book Description
Author: Harald A. Benink
Publisher: Springer Science & Business Media
ISBN: 1475723733
Category : Business & Economics
Languages : en
Pages : 290
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Book Description
Coping with Financial Fragility and Systemic Risk identifies and discusses the sources of perceived fragility in financial institutions and markets and its potential consequences throughout the economy. It then examines private sector solutions for dealing with systemic risk and mitigating the consequences. Finally, the book examines regulatory solutions to these problems.
Author: Dunhong Jin
Publisher: International Monetary Fund
ISBN: 1513519492
Category : Business & Economics
Languages : en
Pages : 46
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Book Description
How to prevent runs on open-end mutual funds? In recent years, markets have observed an innovation that changed the way open-end funds are priced. Alternative pricing rules (known as swing pricing) adjust funds’ net asset values to pass on funds’ trading costs to transacting shareholders. Using unique data on investor transactions in U.K. corporate bond funds, we show that swing pricing eliminates the first-mover advantage arising from the traditional pricing rule and significantly reduces redemptions during stress periods. The positive impact of alternative pricing rules on fund flows reverses in calm periods when costs associated with higher tracking error dominate the pricing effect.
Author: Mr.Manmohan Singh
Publisher: International Monetary Fund
ISBN: 1451982763
Category : Business & Economics
Languages : en
Pages : 17
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Book Description
To mitigate systemic risk, some regulators have advocated the greater use of centralized counterparties (CCPs) to clear Over-The-Counter (OTC) derivatives trades. Regulators should be cognizant that large banks active in the OTC derivatives market do not hold collateral against all the positions in their trading book and the paper proves an estimate of this under-collateralization. Whatever collateral is held by banks is allowed to be rehypothecated (or re-used) to others. Since CCPs would require all positions to have collateral against them, off-loading a significant portion of OTC derivatives transactions to central counterparties (CCPs) would require large increases in posted collateral, possibly requiring large banks to raise more capital. These costs suggest that most large banks will be reluctant to offload their positions to CCPs, and the paper proposes an appropriate capital levy on remaining positions to encourage the transition.
Author: David Murphy
Publisher: Palgrave Macmillan
ISBN: 9781137293855
Category : Business & Economics
Languages : en
Pages : 304
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Book Description
The OTC derivatives market has been hit by a massive wave of regulatory change. Capital and margin requirements have increased, trade reporting has been mandated, and execution mechanisms are evolving. Most of all, central clearing is being imposed for many transactions. OTC Derivatives: Bilateral Trading and Central Clearing explains the new rules and the new models. It discusses the traditional bilateral market, then sets out how this will change due to mandatory central clearing and the new ways in which OTC derivatives will have to be traded, reported, and processed. The risks of OTC derivatives clearing houses are discussed in detail, as are the protections that CCPs have against these risks. The book also looks at alternatives to some of the policy decisions that have been made, showing the balance between costs and benefits of various different approaches to derivatives market stability. The book is both a detailed primer on OTC derivatives clearing and a powerful insight into post-crisis financial regulation. Key features of the book include: • A discussion of the capital rules for OTC derivatives counterparty credit risk in Basel III; • An account of OTC derivatives trade processing in both bilateral and cleared markets; • A detailed account of the risk profile of OTC derivatives CCPs; • An explanation of the risks run in various collateral segregation models; and • A comparison of various macro-prudential tools for enhancing the financial stability of OTC derivatives markets.
Author: John J. Stephens
Publisher: John Wiley & Sons
ISBN: 0470848081
Category : Business & Economics
Languages : en
Pages : 218
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Book Description
Control the number one cause of financial loss currency fluctuation With cross-border commerce now the global norm, companies must now face the greatest threat to their financial stability: financial losses due to currency fluctuations. Written by an international business and banking expert, Managing Currency Risk is an authoritative, accessible look at the variety of methods used to minimize currency risk. Written for the financial market novice, the book explains the nature and uses of a variety of financial instruments without complicated mathematical equations. Discussed in detail are all forms of currency derivatives, such as forward foreign exchange, OTC currency options, currency swaps, currency futures, and options which are illustrated with international examples and case studies. A practical guide on every aspect of currency risk, Managing Currency Risk also serves as a guide to navigating your firm through turbulent economic times.
