IV Regulatory Environment for OTC Derivatives Activities
Author:
Mr. Burkhard Drees
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Mr. Garry J. Schinasi
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Mr. Charles Frederick Kramer
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Mr. R. S Craig
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Language:
English
Print Publication Date:
09 Jan 2001
Keywords:
OP; market; OTC derivatives market; derivative instrument; derivative; University Officers' Training Corps; OTC derivatives contract; OTC derivatives transaction; derivatives position; derivatives activity; Over-the-counter markets; Securities; Derivative markets; Credit; Global

Abstract

Although OTC derivatives on the whole tend to be lightly regulated (as noted in Section III), regulatory systems that are relevant for OTC derivatives can be complex and can have identifiable effects on the organization and location of OTC derivatives activities. Because OTC derivatives transactions usually involve sophisticated counterparties and OTC derivatives markets provide only a limited price discovery function, investor protection and related regulations play only a minor role in the official oversight of the OTC derivatives market. The other two traditional rationales for financial regulation—fostering market efficiency and reducing systemic risk—are important for OTC derivatives markets and are usually addressed by prudential regulations that typically apply to institutions as a whole and not to specific OTC derivatives products. This section illustrates these issues by reviewing the regulatory environments in key jurisdictions. It then analyzes the effects of regulation and regulatory uncertainty on OTC derivatives activities. The section concludes with a discussion of the key challenges for supervision and regulation associated with the use of credit derivatives.

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Cover Modern Banking and OTC Derivatives Markets
Modern Banking and OTC Derivatives Markets
The Transformation of Global Finance and its Implications for Systemic Risk
ISBN:
9781557759993
ISSN:
0251-6365
Publication Date:
09 Jan 2001
Publisher:
International Monetary Fund
DOI:
https://doi.org/10.5089/9781557759993.084
Pages:
77

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