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August 7, 2013
Analyst:
Derivatives markets form a major part of the regulatory reform agenda. While corner-stones of the reforms have been defined, some crucial issues such as the exact definition of standardised derivative contracts, the treatment of cross-border trades and CCP access to central bank liquidity are yet to be clarified. The decrease in volumes in derivatives markets can largely be explained by trade compression. Even though there is a notable shift from dealer to CCP trades for interest rate derivatives and a less remarkable shift for the credit derivatives, the actual capacity of the clearing market is much higher. Regulatory pressure to encourage standardisation seems to have created little impetus for greater standardisation to date and the use of exchange platforms seems to remain subdued. Even though collateral practices would become more expensive for all market participants, non-financial corporations as counterparties are more likely to be affected by collateralisation obligations in the future. A few CCPs dominate the market suggesting concentration issues. [more]