A study on the central clearing of over-the-counter derivatives –emphasis on the U.S. financial reform act 2010

• Main Author: 鄭琇霙
• Other Authors: 楊光華
• Format: Others
• Language: zh-TW
• Online Access: http://ndltd.ncl.edu.tw/handle/98880819360872058029

碩士 === 國立政治大學 === 國際經營與貿易研究所 === 99 === Because of financial innovation, the trading volume of derivatives increases and the market participants get varied. Derivatives, that were developed to hedge or mitigate risk, become one of the tools to speculate. According to statistics, the total nominal value of derivatives traded in the over-the-counter (OTC) market is much higher than that traded in the exchange. Because of the low market transparency, the lack of powerful risk mitigating mechanism and the high correlation among major market participants, default of one counterparty may cause systemic risk. After the global financial market meltdown in 2008, countries devoted attention to the causes of the financial crisis, especially to the OTC derivatives. To reduce the risk identified in the OTC derivatives market, trading on the exchange or electronic trading platform, central clearing and information disclosure are some measures to be implemented. The Dodd-Frank Act was the earliest reform act passed by the U.S. among these countries. Although central clearing is the major component of the act, there are also several exemptions of it. For example, non-standard derivatives, foreign exchange swaps, foreign exchange forwards and derivatives traded by end-user are exempted from central clearing requirement. To be central cleared, the OTC derivatives must be standardized and with certain liquidity. Once central cleared, companies would be unable to use customized derivatives to mitigate commercial risk and the cost of hedge would probability increases. These are some reasons mentioned to support the central clearing exemption. However, the existence of these exemptions may become the inherent loopholes of the act. This article would first introduce the central clearing exemptions and evaluate the possible effect these exemptions might cause.