United States: Publication of Financial Sector Assessment Program Documentation: Technical Note on Regulatory Reform: OTC Derivatives
IMF Staff Country Reports, July 30, 2010
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- United States: Publication of Financial Sector Assessment Program Documentation: Technical Note on Regulatory Reform: OTC Derivatives
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Bibliographic details
- Published: July 30, 2010
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781455206797.002
Overview
- OTC derivatives markets were an increasing source of vulnerability heading into the crisis.
- OTC derivatives markets contributed to the financial crisis.
- Credit derivatives facilitated the development and growth of the structured securities markets; and the purchasing, packaging, and distribution of poorly underwritten loans and mortgages.
- The proposed reforms will make major improvements to market trading liquidity and the price discovery process.
- The reversal of the deregulation of OTC derivatives marks a major improvement in regulatory approach, and it closes an important gap in the regulatory framework.
Key findings
- OTC derivatives markets increased systemic vulnerability prior to the crisis.
- Credit derivatives played a central role in enabling growth of structured securities markets tied to poorly underwritten loans and mortgages.
- Reforms are expected to improve:
- market trading liquidity
- the price discovery process
- Re-regulation of OTC derivatives constitutes a significant strengthening of the regulatory framework.
Policy implications and recommendations
- Reverse deregulatory gaps in OTC derivatives oversight to strengthen the regulatory framework.
- Implement proposed reforms aimed at enhancing market liquidity and price discovery in OTC derivative markets.