EDHEC-Risk gives a global overview of the current initiatives on regulating OTC markets
07 January 2010
Dr Arjuna Sittampalam, Research Associate with EDHEC-Risk Institute, stresses that the main regulatory reforms on OTCs are not confined to US and Europe. The Singapore Exchange and China are also considering central clearing.
Dr Arjuna Sittampalam, Research Associate with EDHEC-Risk Institute, has written about the differences between the main regulatory reforms proposed in the US and in EU.
Concerning standardisation of OTC contracts, Mr Sittampalam writes that “some contracts can be standardised in the sense that at issue they can follow the same format. This process is now being applied to many European CDSs, reflecting progress in this field. Natasha de Teran, technology correspondent of the Financial News, feels that the authorities are struggling with the definition of standardisation, and they might have to be for some time to come. If her surmise is correct, then it will be a while before the proposals become actual rules.”
He concludes by saying that “in recent years, pension funds and investment management houses have begun to take to derivatives in a big way, enabling them to carry out better risk management and to offer wider choice to the beneficiaries. It will be a tragedy if this trend is reversed by hasty, ill-thought-out regulatory pressures.”
© EDHEC
