Insightful article, specially about RBI's positions & risk.Regarding the OTC Vs exchange-traded debate - at a point of time even plain vanilla CDS started off globally as 'exotic' products. Later as the number of parties interested grew, volumes grew and their was a legitimate case for more liquid/standardised products. Taking a leaf out of this experience, shouldn't we be saying that there is a "right" time when these OTC (Forex/Credit) products would make sense being exchange traded rather than privately negotiated. Then, keeping turf-war argument aside for a moment, perhaps there is need to assess whether our markets/economy has reached that level.(Would like to know more on this!)Having said that, to me, the debate really is only about 'when' rather than 'why'.Thanks.
Please also see my piece on OTC derivatives in the Economic Times of 24th Sept - linked at my blog spparekh.blogspot.com
Sandeep's ET article is here.
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Hi Ajay ,Do you feel that the financial power will shift to oil countries and they will be able to jump in and get cheap assets and become stronger in coming years .. also their quick presence in Africa to mark competitive edge will create more imbalances in days to come
Sir, where do you stand on this debate for the bond market? RBI runs what is in effect an exchange, yet that structure seems to be bad for market development. Is it a question of different structures for different instruments? Or is it that the RBI should be out of it no matter what? Thanks.
Ajay, this really gives a nice picture..I personally feel the developments happening in the OTC market is leading it to Exchange market format.. I had written a paper on this too. Can have a look athttp://researchunlimited.blogspot.com/2008/09/otc-derivatives-market-recent.html#links
Thanks Anurag for your succinct whitepaper on OTC Derivative Markets - Recent Developments - Sept 2008based on :BIS CPSS Publication # 77 : New developments in clearing and settlement arrangements for OTC derivatives - March 2007 BIS CPSS Publication # 27 : Report on OTC Derivatives: Settlement procedures and counterparty risk management - September 1998 Brenda González-Hermosillo: THE Microstructure of Financial Derivatives Markets : Exchange – Tradedversus Over the Counter (March 1994)Stimulating blog eliciting excellent inputs from far and wide...Kudos to Prof Shah & Parekh; and Anurag, too for his contribution !Cheers,P Manohar Bhatpmbhat@gmail.com
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