September 26, 2012
Leaders from the World Federation of Exchanges (WFE) have re-emphasized their support of regulatory action in the global derivatives market on the occasion of the publication of a new study commissioned by the WFE to examine the state of over-the-counter (OTC) and exchange-traded derivatives. The report describes how regulatory reform is resulting in significant shifts in product selection across the global risk transfer market.
During and immediately following the global financial crisis in 2008, the WFE vigorously advocated for reform and regulation of the OTC derivatives markets, which were identified as having made significant contributions to financial turmoil. In 2010, the WFE commissioned a study by TABB Group, a financial markets research and advisory firm, to assess risk in the OTC derivatives markets. This initial report was titled "The Global Risk Transfer Market: Developments in OTC and Exchange-Traded Derivatives."
The latest report, "The New Global Risk Transfer Market: Transformation and the Status Quo," also by Tabb Group, provides an updated assessment on the changes in market structure and how new regulations address the issues with OTC and exchange-traded derivatives that were highlighted in the in the 2010 study. The report also aims to contribute to the current discussion by proposing international standards.
Jorge Alegria, Chairman of WFE's Derivatives Chapter, IOMA, and Chief Executive Officer of the Mexican Derivatives Exchange (MexDer), added: "The paradigm shift clearly present in trading OTC and exchange-traded derivatives is reflective of the pending legislation in both Europe and the United States, and we see that market participants are moving to exchange traded derivatives and central clearing even before it is mandated as they see the benefit. "Clearing derivatives has become more of a necessity in light of these potential changes, and we are glad that the Tabb Group has been able to offer a measureable analysis of how the markets are reacting."
Newly appointed Secretary General of the WFE Hüseyin Erkan said the WFE continues to support tighter regulation of OTC derivatives market, as well as promote the benefits of standardized contracts traded on regulated exchange-traded markets. He said, "The WFE has been a large supporter of discussion and regulatory action around the OTC derivatives market since the risks inherent in the system were realized in 2008. For that reason, the members of the WFE felt it was important to re-assess how current changes in market structure and new regulations are affecting the OTC market, and we have commissioned Tabb Group to update the 2010 report on the topic."
ABOUT THE WFE:
The World Federation of Exchanges is the trade association for the operators of regulated financial exchanges. With 54 members from around the globe representing over 100 exchanges, the WFE helps develop and promotes standards in markets, supporting reform in the regulation of OTC derivatives markets, international cooperation and closer coordination between regulators and regulated exchanges. WFE exchanges are home to more than 45,000 listed companies, with a total market capitalization that is equivalent to world GDP.