The International Swaps and Derivatives Association, Inc. (ISDA) today announced the publication of a paper, Non-Cleared OTC Derivatives: Their Importance to the Global Economy.
The non-cleared segment of the over-the-counter (OTC) derivatives market includes many important products with significant value to the economy. These products enable industrial companies and governments to effectively finance and manage risk in their operations and activities and help pension funds meet their obligations to retirees. They help support economic growth by enabling banks to lend to corporate and individual customers. They play a vital role in virtually every industry – from financial services to international trade to home mortgages.
Current regulatory proposals regarding margin requirements for non-cleared OTC derivatives pose significant threats to the continued functioning of this vital market segment. Such proposals also fail to fully consider the lessons learned regarding margin practices during the recent financial crisis.
The paper explains what non-cleared OTC derivatives are, who uses them and why. It outlines the evolution of clearing in the OTC derivatives markets, why some – but not all – OTC derivatives will be cleared, the types and benefits of non-cleared OTC derivatives and the impact of the regulatory proposals in this area.
The paper is available in the ISDA website’s Research section under Studies.
