Trade repositories key to understanding exposures
Michael Bodson, president and CEO of DTCC feels that as derivatives are a global business, the ability to provide regulators with immediate access to a global data set is crucial. April 08, 2013 | Michael BodsonAsia’s share of the $648 trillion over-the-counter (OTC) derivatives market, currently at around 8%, is expected to grow significantly in the coming years. The region’s ability to manage the attendant risks will play an important role in protecting Asian markets from repeating the mistakes of other financial centres. A key lesson from the 2008 crisis emerged well before the dust had settled—to effectively manage systemic risk, regulators need transparency in the market. Trade repositories, essentially giant databases that hold detailed trade information on derivatives transactions, were quickly identified as central to understanding exposures and to flagging risky market activities. This solution was crystallised in the wake of the Lehman Brothers’ bankruptcy, when credit default swap (CDS) data housed in a repository operated by The Depository Trust & Clearing Corporation (DTCC) gave regulators and the markets an accurate picture of CDS exposures to Lehman. When this data was made public, the panic that had gripped the markets quickly dissipated. This watershed moment established trade repositories as an essential tool to help regulators manage systemic risk and to give the public transparency into position and activity levels in the CDS market. Today, as a result of voluntary reporting by the financial industry, our global trade repository holds data on more than 98% of credit default swaps, 70% of interest rate derivatives and 60% of the equities derivatives traded globally—and it is expanding to support foreign exchange and commodities derivatives in the near future. More than 40 regulators globally, including Asian authorities, now rely on this information to monitor systemic risk, ushering in a new era of greater information sharing and cooperation among supervisory agencies. This collaboration is particularly important because trade repositories will only be able to deliver their full value by present... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Markets & Exchanges, Regulation, Risk & Compliance, Risk and Regulation, Trading & DataMarkets Exchanges,riskregulation,Risk & Compliance,Risk and Regulation,Trading & Data, Markets & Exchanges,Regulation,Risk & Compliance,Risk and Regulation,Trading & Data, Keywords:DTCC, Michael Bodson, CDS, Lehman Brothers, Systemic Risk DTCC, Michael Bodson, CDS, Lehman Brothers, Systemic Risk
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