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Dodd-Frank Act most influential legislation on capital markets in 40 years

Woodbine Associates, a capital markets research and advisory firm, says the Dodd-Frank Act has potential to be the most influential legislation on the capital markets in the past 40 years.

The firm has released a brief entitled “The Dodd-Frank Act – Implications for the OTC Derivative Markets.”

The brief examines key provisions of the law pertaining to the over-the-counter derivative markets and assesses their impact on risk, market operations and market structure.

Sean Owens, director of fixed income at Woodbine Associates, says: “Understandably, there is a great deal of concern, apprehension, and desire for information surrounding this landmark legislation.”

Focusing on provisions contained in Title VII of the Dodd-Frank Act, the analysis explores the key areas of classification of market participants, the clearing and trading requirements for derivatives, and the “push out” provision requiring banks to separate or spin-off some trading operations.

The brief also discusses the significance of definitions and rulemaking in the implementation process, analyses the impact of regulation on participants and addresses the implication of new clearing, trading and capital requirements.

Relevant changes to market structure likely to result from the law are outlined, including the effect of end users’ clearing options, hedging strategies combining direct execution with counterparties and derivative execution on regulated platforms, and the effect of increased transparency on spreads.

The brief also clarifies provisions in the law, projects its impact on the markets, and focuses on specific execution-level issues that market participants will need to consider.

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