scholarly journals Modern Banking and OTC Derivatives Markets: The Transformation of Global Finance and its Implications for Systemic Risk

2001 ◽  
Author(s):  
Burkhard Drees ◽  
Garry Schinasi ◽  
Charles Kramer ◽  
R. Craig ◽  
◽  
...  
Keyword(s):  
Systemic Risk ◽  
Global Finance ◽  
Otc Derivatives ◽  
Derivatives Markets

The Politics and Practices of Central Clearing in OTC Derivatives Markets

2018 ◽  
Author(s):  
Erin Lockwood
Keyword(s):  
Financial Markets ◽  
Unintended Consequences ◽  
Regulatory Change ◽  
Significant Shift ◽  
Risk Modeling ◽  
Risk Models ◽  
Over The Counter ◽  
Otc Derivatives ◽  
Derivatives Markets ◽  
Policy Shifts

This chapter focuses on the unintended consequences of the post-crisis mandate that over-the-counter (OTC) derivatives be cleared through centralized clearinghouses in an effort to reduce counterparty and systemic risk. Although central clearing has been widely implemented, it has reproduced many of the same characteristics of financial markets that contributed to the 2008 crisis: concentrated risk, moral hazard, and a reliance on faulty risk models. What accounts for the recalcitrance of the OTC derivatives market to a regulatory change? The chapter argues that focusing on the technologies and practices used to govern derivatives markets helps explain the absence of more radical regulatory policy shifts in derivatives regulation. Although there has been a significant shift in who regulates OTC markets, much less has changed at the level of the specific practices that govern these markets, and the chapter examines the continued reliance on netting, collateralization, and risk modeling within clearinghouses.

Regulate in Haste, Repent at Leisure: Private and Public Orderings in OTC Derivatives Markets

2020 ◽  
Author(s):  
Craig Pirrong
Keyword(s):  
Financial Crisis ◽  
Functional Approach ◽  
Over The Counter ◽  
Otc Derivatives ◽  
Private And Public ◽  
Derivatives Markets

Over-the-counter derivatives were widely blamed for causing or exacerbating the financial crisis. As a result of perceived structural failings in these markets, legislators and regulators mandated substantial changes. The most notable of these changes was a requirement that most derivatives be centrally cleared. Under clearing, a central counterparty becomes a party to all contracts and guarantees performance on them. These mandates were predicated on a defective understanding of the economics of derivatives markets. The proposed reforms were fundamentally flawed because they were rooted in an institutional, rather than functional, approach to regulation.

‘Targeted Touchdown’ and ‘Partial Liftoff’: Post-Crisis Dispute Resolution in the OTC Derivatives Markets and the Challenge for ISDA*

2012 ◽  
Vol 13 (12) ◽  
pp. 1297-1328 ◽  
Author(s):  
John Biggins
Keyword(s):  
Dispute Resolution ◽  
Trade Association ◽  
Regulatory Regime ◽  
Over The Counter ◽  
Otc Derivatives ◽  
The Creation ◽  
Derivatives Markets

Since the 1980s, influential participants in the niche over-the-counter (OTC) derivatives markets have sought to encourage contractual standardization in the industry to mitigate the potential for unforeseen legal interruptions and ensure the enforceability of OTC derivatives contracts. The International Swaps and Derivatives Association (ISDA), a trade association and standard-setter, has spearheaded this effort; resulting in the creation and sustenance of a highly successful transnational private regulatory regime (TPRER). Most notably, ISDA has generated a standardized boilerplate contract for OTC derivatives, known as the ‘ISDA Master Agreement’. However, the TPRER within which the ISDA Master Agreement operates displays some intriguing features and paradoxes. Chief amongst these paradoxes is that, while this TPRER appears at first glance to be highly legalistic and formal, indications are that rates of formal litigation between members of the regulatory regime have traditionally been low relative to the size of the market (the total notional amount of OTC derivatives contracts outstanding at the end of 2011 was estimated at US$648 trillion).

Systemic risk and competition in OTC derivatives dealing: evidence from client failures

2011 ◽  
Vol 37 (12) ◽  
pp. 1161-1189
Author(s):  
Ekaterina E. Emm ◽  
Ufuk Ince
Keyword(s):  
Systemic Risk ◽  
Otc Derivatives

scholarly journals Systemic risk and banking regulation: Some facts on the new regulatory framework

2015 ◽  
Vol 12 (2) ◽  
pp. 52-63 ◽  
Author(s):  
Michele Bonollo ◽  
Irene Crimaldi ◽  
Andrea Flori ◽  
Fabio Pammolli ◽  
Massimo Riccaboni
Keyword(s):  
Systemic Risk ◽  
Banking Regulation ◽  
Regulatory Framework ◽  
Data Availability ◽  
Relevant Role ◽  
Recent Financial Crisis ◽  
The Stability ◽  
Derivatives Markets ◽  
Shed Light

The recent financial crisis highlighted the relevant role of the systemic effects of banks’ defaults on the stability of the whole financial system. In this work we draw an organic picture of the current regulations, moving from the definitions of systemic risk to the issues concerning data availability. We show how a more detailed flow of data on traded deals might shed light on some systemic risk features taken into account only partially in the past. In particular, we analyse how the new regulatory framework allows regulators to describe OTC derivatives markets according to more detailed partitions, thus depicting a more realistic picture of the system. Finally, we suggest to study sub-markets illiquidity conditions to consider possible spill over effects which might lead to a worsening for the entire system

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