Preview

Economics of Contemporary Russia

Advanced search

Comparative Analysis of Foreign Regulatory Legislation of OTC Derivatives

https://doi.org/10.33293/1609-1442-2021-2(93)-115-122

Abstract

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.

About the Author

Ivan R. Ipatyev
Financial University under the Government of the Russian Federation, Moscow; PJSC Sberbank, Moscow
Russian Federation


References

1. Artemenko A. V. (2019). Features of trading derivatives on exchange and OTC markets. Journal of Economy and Business, vol. 4–3, pp. 11–13 (in Russian). DOI: 10.24411/2411-0450-2019-10560

2. Vorontsovskiy A. V. (2020). Investment management: Investments and investment risks in the real sector of the economy. Textbook and Workshop for Universities. Moscow, Yurayt. 391 p. (in Russian).

3. Ibrokhimov S. S. (2019). Exchange-traded and over-the-counter financial derivatives. State and Market In the Context of Globalization of the World Economic Space: International scientific and practical conference, pp. 43–44 (in Russian).

4. Makshanova A. V. (2014). Derivative financial instruments: concept, types and main strategies of use. Young Scientist, no. 11 (70), pp. 214–216 (in Russian). URL: https://moluch.ru/archive/70/12084

5. Acworth W., Morrison J. (2011). Summary of selected CFTC rulemakings. The Magazine of the Futures Industry, vol. 6, no. 1(2), pp. 27–29.

6. Belchambers A. (2011). OTC derivatives and EU regulatory reform. The Magazine of the Futures Industry, vol. 37, no. 6, pp. 27–30.

7. BIS (2011). Bank for International Settlements: “Semiannual OTC Derivatives Statistics at End June 2011. Amounts Outstanding of Over-the-Сounter (OTC) Derivatives by Risk Category and Instrument”. Basel, Bank for International Settlements, 2011. URL: http://www.bis.org/statistics/otcder/dt1920a.csv

8. Chance C. (2010). Regulation of OTC Derivatives markets: A comparison of EU and US initiatives. The Magazine of the Futures Industry, vol. 3, no. 1, pp. 40–43.

9. Chaudhury M. (2016). Why Basel II Market Risk VaR is Too Conservative. Journal of Trading, vol. 38, no. 11 (1), pp. 6–12.

10. Culp C. (2009). The treasury department’ s proposed regulation of OTC derivatives clearing and settlement. Chicago, University of Chicago Booth School of Business Research Paper.

11. Duffie D., Zhu H. (2010). Does a central clearing counterparty reduce counterparty risk? Stanford University Graduate School of Business. URL: http://www.stanford.edu/~duffie/DuffieZhu.pdf

12. European Commission (2010). Impact Assessment for Regulation of the European Parliament and of the Council on OTC Derivatives, Central Counterparties and Trade Repositories. URL: http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=SEC:2010: 1055: FIN: EN: PDF

13. Ferrarini G., Moloney N. (2012). Reshaping order execution in the EU and the role of interest groups: From MiFID I to MiFID II. European Business Organization Law Review, vol. 13, no. 4, pp. 566–570.

14. Implementing OTC Derivatives Market Reform (2010). Basel. Financial Stability Board,. URL: http://www.financialstabilityboard.org/publications/r_101025.pdf

15. Malyshev P., Withrow A. (2011). Dodd–Frank implications for swaps market participants: Data matters. The Magazine of the Futures Industry. Houston, University of Houston, pp. 22–26.

16. Meijer A., Wilson R. (2010). New OTC derivatives regulation and the future of the derivatives industry. Journal of Securities Operations and Custody, vol. 32, no. 3 (3), pp. 241–251.

17. Pirrong C. (2009). The economics of clearing in derivatives markets: Netting, asymmetric information, and the sharing of default risks through a central counterparty. Houston. University of Houston. URL: http://www.cba.uh.edu/spirrong/clearing_organization.pdf

18. Rao D.G. (2012). Derivatives in risk management. International Journal of Advanced Research in Management and Social Sciences, vol. 18, no. 1 (4), pp. 55–59.

19. Rausser G., Balson W., Stevens R. (2010). Centralized clearing for Over-the-Сounter Derivatives. Journal of Financial Economic Policy, vol. 2, no. 4, pp. 346–359.

20. Rausser G., Stevens R. (2009). Public-private partnerships: Goods and the structure of contracts. Annual Review of Resource Economics, vol. 1, no. 1, pp. 75–98.

21. Shaofang Li M. M. (2014). The Use of financial derivatives and risks U.S. bank holding companies. International Review of Financial Analysis, no. 2, pp. 46–71.

22. Sherman T., Sterling J. (2010). Proposed US and EU Derivatives Regulations: How they compare. URL: http://www.shearman.com/files/Publication/84c83ccc‑2a2d‑4e20-880c‑45c31c6059ea/Presentation/PublicationAttachment/a13fc03b‑2189-

23. 413c‑9ce1-0b066c5d27f1/FIA‑111010-Proposed-US-and-EU-Derivatives-Regulations.pdf

24. Talat Afza A. A. (2011). Corporate derivatives and foreign exchange risk management: A case study of nonfinancial. The Journal of Risk Finance, vol. 8, no. 12 (5), pp. 409–420.

25. White T. (2015). From the group of twenty to the group of two: The need for harmonizing derivatives regulation between the United States and the European Union, law and contemporary problems. Journal of Trading, vol. 78, no. 6 (8), pp. 298–305.


Review

For citations:


Ipatyev I.R. Comparative Analysis of Foreign Regulatory Legislation of OTC Derivatives. Economics of Contemporary Russia. 2021;(2):115-122. (In Russ.) https://doi.org/10.33293/1609-1442-2021-2(93)-115-122

Views: 576


Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 License.


ISSN 1609-1442 (Print)
ISSN 2618-8996 (Online)