Derivatives Regulation and Control

The world of OTC derivatives is undergoing unprecedented change.  It grew rapidly over the last thirty years with listed markets evolving in futures and option where the notionals traded vastly exceeded the liquidity of many underlying markets while the OTC markets provided hedging and risk taking opportunities with mathematical precision.

However, following the Credit Crunch the major governments decided that the OTC markets needed much tighter global regulation to reduce the systemic risk that had built up.  Control had to go beyond the risk appetite of individual institutions which also meant that much greater visibility would also be required.

Is trader fraud dead or has it just been automated? Some thoughts on recent changes and a history of the topic.

Here is a brief paper summarising the key aspects of the BIS/IOSCO proposals for the margining of uncleared OTC derivatives. The major regulators have committed to implementing regimes based on these rules.BIS/ IOSCO Margin for uncleared OTC derivatives