Derivative Market Competition; OTC Versus Organized Derivative Exchanges
Recent regulatory initiatives in the United States have again raised the issue of a 'level regulatory and supervisory playing field' and the degree of competition globally between over-the-counter (OTC) derivatives and organized derivative exchange (ODE) markets. This paper models some important aspects of how an ODE market interrelates with the OTC markets. It analyzes various ways in which an ODE market can respond to competition from the OTC markets and considers whether ODE markets would actually benefit from a more level playing field. Among other factors, such as different transaction costs, different abilities to mitigate credit risk play a significant role in determining the degree of competition between the two types of markets. This implies that a potentially important service ODE markets can provide OTC market participants is to extend clearing services to them. Such services would allow the OTC markets to focus more on providing less competitive contracts/innovations and instead customize its contracts to specific investors' risk preferences and needs.
|Date of creation:||01 Apr 2004|
|Date of revision:|
|Contact details of provider:|| Postal: International Monetary Fund, Washington, DC USA|
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Tano Santos & José A. Scheinkman, 2000.
"Competition Among Exchanges,"
CRSP working papers
514, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Randall S. Kroszner, 1999. "Can the Financial Markets Privately Regulate Risk? The Development of Derivatives Clearing Houses and Recent Over-the Counter Innovations," CRSP working papers 493, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:04/61. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.