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In China, Neither Side Wants Derivatives Confrontation

September 29, 2009

Analysis of:Low Heat Likely as China Stews On Derivatives Losses | www.reuters.com

China Derivatives Fallout likely LimitedA number of reports in late summer said China’s State-owned Assets Supervision and Administration was giving its tacit sanction to Chinese companies to back out of loss-making derivatives positions. However, a recent Reuters story (Sept. 29) suggests that both sides will aim to head off litigation or even arbitration. On the one hand, Chinese authorities recognize that hedging tools are necessary. On the other, the foreign investment banks who were the counterparties to the deals would prefer to avoid a confrontation that might endanger a promising market.

Will Exchanges be the Death of OTC Derivatives?

November 27, 2008

Analysis of:Listed Derivatives Boosted by Need for Transparency | www.efinancialnews.com

The huge and lucrative OTC derivatives marketplace is virtually certain to undergo major structural change soon. The changes will determine how the instruments are traded and how the benefits--not to mention profits--from the business are allocated. A number of alternative models have been proposed, including a wholesale migration to existing exchanges to leaving the trading of the products in the OTC market and creating a centralized clearing and settlement platform. The volume of futures exchanges such as the U.S. giant Chicago Mercantile Exchange and the Europe's Eurex unit of Deutsche Borse do bear witness to the attractiveness of futures. Most exchanges' volumes are up this year vs. last year, in sharp contrast to the near frozen OTC market.

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