Ensuring Uncertainty? The International Political Economy of Over-The-Counter Derivatives Trading

<p>Over-the-counter (OTC) financial derivatives are increasingly used in a globalising financial market as tools for risk management. However, the advent of large financial crises as a result of their use raises issue as to the risks derivatives themselves might pose to the players who use them, as well as to the international financial system as a whole. It is, therefore, a key question to ask what regulation might be apt for trade in OTC derivatives. This thesis considers how a post-structuralist account might offer important insight into how this question is understood. Post-structuralist, as well as broader social constructivist and non-rationalist critiques help illustrate some of the limits to objectivist rationalism in practices of financial risk management. This thesis argues that the danger of ignoring such critiques include a continued “illusion” of individual and state-actor control over macro-economic processes, such as the phenomenal volume of trade in OTC derivatives contracts today. In this light, therefore, the regulation of OTC derivatives is not just a political question of who does and should have explicit policy control over economic and regulatory processes; but it is also a political question over knowledge constructs, and how particular technologies and specialist discourses are developed that enable “experts” legitimacy and power where it is not necessarily justified.</p>

Ensuring Uncertainty? The International Political Economy of Over-The-Counter Derivatives Trading

<p>Over-the-counter (OTC) financial derivatives are increasingly used in a globalising financial market as tools for risk management. However, the advent of large financial crises as a result of their use raises issue as to the risks derivatives themselves might pose to the players who use them, as well as to the international financial system as a whole. It is, therefore, a key question to ask what regulation might be apt for trade in OTC derivatives. This thesis considers how a post-structuralist account might offer important insight into how this question is understood. Post-structuralist, as well as broader social constructivist and non-rationalist critiques help illustrate some of the limits to objectivist rationalism in practices of financial risk management. This thesis argues that the danger of ignoring such critiques include a continued “illusion” of individual and state-actor control over macro-economic processes, such as the phenomenal volume of trade in OTC derivatives contracts today. In this light, therefore, the regulation of OTC derivatives is not just a political question of who does and should have explicit policy control over economic and regulatory processes; but it is also a political question over knowledge constructs, and how particular technologies and specialist discourses are developed that enable “experts” legitimacy and power where it is not necessarily justified.</p>

Comparative Analysis of Foreign Regulatory Legislation of OTC Derivatives

The problems associated with existing regulatory initiatives that are meant to eliminate opaque market and with the clearing of over-the-counter derivative instruments. Comprehensively examination of the key similarities and differences between US and EU approaches to regulating the OTC derivatives market. For the study, we used the methods of logical analysis, theoretical generalization and systematization. The main difference between these approaches is the restrictions on commercial banking trade with the separation of derivative trading operations, with the rules of ownership and the establishment of mandatory requirements for exchange trade by central counterparties, as well as with commercial banking. The main similarity is the obligatory clearing of standardized contracts, the scope of derivatives, clearing for consumers and reporting on cleared and uncleaned derivative transactions by almost all financial counterparties. Cross-border clearing is facilitated by two approaches used in the US and the EU, where the legal culture differs from each other. Summing up, we can note that the greatest flexibility in dealing with unforeseen consequences for the regulator is provided by the US approach. At this stage, we have considered an institutional description of the differences and similarities between these approaches to regulating OTC derivatives in order to ensure trade transparency and greater stability.

Smart contracts in OTC derivatives trading: Legal aspects

The articles focuses on opportunities and problems connected with implementation of smart contracts into “over-the-counter” derivatives trading. The importance of success of professionals who work on this cannot be underestimated: the volume of “over-the-counter” derivatives market is huge, its automatization and transparency provided by implemented smart contracts could dramatically increase its economic efficiency. In this study, the author aims at answering the following question: what aspects of “over-the-counter” derivatives trading could take a quantum leap because of the implementation of smart contacts and, per contra, what aspects could not benefit from implementation of underlying technologies at all. The author starts with the overview of “over-the-counter” derivatives market, investigates the matter of its internal design, main features and the structure of legal documentation used by market participants. Then the article provides the analysis of smart contract phenomenon, summary of its engineering aspects and difficulties connected with the implementation of smart contracts as a practical matter, including underlying legal issues. The third part is a synthesis of ideas indicated in previous parts. Herein the author examines the perspectives of adoption of smart contracts in “over-the-counter” derivatives trading, identifies the problems that cannot be resolved yet: different parts of legal relations existing between market participants shall be structured in a flexible way and shall be subject to revision under specific conditions. Smart contracts in their turn cannot be considered as a flexible tool and the revision of their terms requires the input from highly experienced specialists that dramatically increases the costs of their implementation and maintenance. As a matter of conclusion, the author gives recommendation to potential developers of smart contacts to implement them only in relation to the automatization of payments and deliveries as at the moment the clearing can be considered as the most appropriate area for the implementation and use of smart contracts.

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

Priorities for upgrading the Russian lending system in the current circumstances

Subject. The article focuses on the lending system in the banking sector of Russia. Objectives. We examine and set priorities for modernizing the Russian lending system in the current circumstances. Methods. The article represents the statistical analysis of macroeconomic developments, estimates of the banking sector performance. Results. We indicate what the financial system shall mainly address and how banking resources can increase their contribution to the socio-economic development of the territory. The financial position of customers shall be evaluated on the differential basis, considering the industrial specifics of their business, inter alia, for making loan and similar reserves, imposing less strict requirements to additional information on borrowers. Conclusions and Relevance. Macroprudential regulation is one of the most important and extensive objectives to improve the financial market in Russia. The mandatory centralized clearance seems promising with respect to OTC derivatives if viewed by assessing the economic motivation for using the clearance that involves the central counterpart, as compared with bilateral deals. The actions are supposed to positively influence the development of the national economy. The findings can be used to examine development trends in the Russian banking sector.