The necessity of increased stabilisation and regulation of financial markets, especially over-the-counter markets, has received increased international attention following the financial crisis of 2007-08.1 Previously, swap markets were largely ‘in the dark’ when compared to exchange traded derivatives. The reactionary regulation, the Dodd-Frank Act, has severely tightened the OTC swaps markets through standardisation, increased collateral requirements and reporting standards and a more refined clearing mandate; to continue our analogy, it has sought to bring the swaps market into the light. Due to this increased regulation and subsequent increased costs associated with trading swaps, large swathes of swap trading migrated onto futures exchanges, in a process known as swap futurisation. This offered market participants regulatory certainty as well as a reduction in some of the more onerous costs and requirements under the Dodd-Frank Act. With eight years of trading under the Dodd-Frank regulation, our investigation into the advantages and disadvantages of swap futurisation will focus on trends seen in American data. Following on we will look more closely at the European Union’s response, namely the Markets in Financial Instruments Directive II and the Markets in Financial Instruments Regulation.
Table of contents
1. Introduction
2. Futurisation of swaps
2.1 Advantages
2.1.1 Reduced initial margin
2.1.2 Greater transparency
2.1.3 Lower block size threshold
2.2 Disadvantages
2.2.1 Systemic Risk - the downside of Reduced Initial Margin
2.2.2 Could lower block thresholds potentially harm transparency?
2.2.3 Suboptimal Hedging
3. Regulation of OTC markets
4. Conclusion
- Citar trabajo
- Sabrina Schleimer (Autor), 2018, Futurisation of Swaps & OTC Market Regulation with MIFIR and MIFID II, Múnich, GRIN Verlag, https://www.grin.com/document/437647
-
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X.