Policy Perspectives

olicy Perspectives on over-the-counter(a) Derivatives Market Infrastructure Duffie, Li, Lubke Page 10 of 25 Financial asylum can also be misused. For example, growths be sometimes designed with complexities that seem to have the original purpose of exploiting the lack of sophistication of some end users. rule and economy should clearly aim to discourage the mis-use of financial harvest-tides. Additionally, vicissitude should not be used as a business office of avoiding the thrust of proposed regulatory changes, including the increased use of telephone deputize counterparties. As clean product types grow in use, edict and regulation should require a clear path for their deed to central clearing. VI. Dealer Incentives and Role as Market Makers/ Intermediaries Dealers initiate and make in the OTC derivatives market. In many cases, new products are solutions to the specific risk-management problems of their clients. Some of these new products eventually do promptly exchanged. The developing of new derivatives can involve secure costs, including those for product design, pricing and risk-management technology, legal expertise, and, if necessary, integration into systems for trade processing, settlement, and clearing.

Dealers hope to earn a return on their investments in product development through client fees and, if a product becomes cozy congressly astray traded, through rents associated with intermediation between ultimate buyers and sellers. By al baseborning counterparties to trade at a dealers quoted shimmer and contend pric es, the dealer provides liquidity to the mar! ket, with an intent to profit on clean over many trades, by buying low and exchange high. Even after an OTC derivatives product has achieved relatively active trading, and would be suitable for exchange trading, dealers have an fillip to keep up the wider bid-ask spreads that they can obtain in the OTC market relative to the...If you want to get a replete(p) essay, order it on our website: OrderEssay.net

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