Deutsche Börse and Eurex have published a white paper containing a blueprint for reducing systemic risk in the global derivatives market.
Deutsche Börse and Eurex have published a white paper containing a blueprint for reducing systemic risk in the global derivatives market.
It resumes the discussion of Deutsche Börse’s first derivatives white paper, published in May 2008, which provided a descriptive introduction to the global derivatives market.
The paper discusses both the derivatives market’s resilience and its structural deficiencies against the backdrop of the crisis. It focuses primarily on the advantages of effective risk management and improved transparency, especially for OTC derivatives, to ensure that the derivatives market functions well as a whole.
The blueprint provides key proposals on how to strengthen the market’s current structure:
• Maximize the use of organised markets for derivatives trading
• Maximize the use of central counterparties where trading on organised markets is not feasible
• Bilateral collateralization of derivatives exposure, preferably handled by a neutral third party, where organised trading or use of CCPs is not suitable, and
• Require mandatory registration of open risk positions, establishing reporting standards for all derivative contracts.
Andreas Preuss, deputy chief executive of Deutsche Börse and chief executive of Eurex, says: ‘One major conclusion of the new white paper is that merely introducing stricter regulatory and supervisory requirements may not suffice and that a strengthened market structure with built-in principles to minimise systemic risk appears to be necessary.’
Deutsche Börse and Eurex have published the new white paper to provide interested readers with a comprehensive presentation of the subject matter.’
