Are OTC derivatives regulated?

An over-the-counter (OTC) derivative is a financial contract that is arranged between two counterparties but with minimal intermediation or regulation. OTC derivatives do not have standardized terms and they are not listed on an asset exchange.

Who regulates OTC derivatives?

Commodity Futures Trading Commission
There are three key financial regulators whose mandates impinge directly on OTC derivatives activities; the Commodity Futures Trading Commission (CFTC); the Securities and Exchange Commission (SEC); and bank regulators.

Who regulates OTC derivatives in India?

the Reserve Bank of India (RBI)
Explicit regulation of OTC derivatives in India has been a key element of the policy framework which has helped in preserving systemic stability. The responsibility for the regulation of all interest rate, forex and credit derivatives, including OTC derivatives, vests with the Reserve Bank of India (RBI).

How are OTC derivatives cleared?

Before an OTC derivative can be cleared through a CCP, core documentation needs to be established between the client, executing broker, clearing member and the relevant CCP. Instead, only clearing members of a designated CCP are able to clear an OTC derivative directly with the CCP.

What is Dodd Frank Title VII?

Title VII of Dodd-Frank Wall Street Reform and Consumer Protection Act addresses the gap in U.S. financial regulation of OTC swaps by providing a comprehensive framework for the regulation of the OTC swaps markets. The CFTC has primary regulatory authority over all other swaps, such as energy and agricultural swaps.

Who bears the risk in OTC derivatives?

It’s the CCP that bears the counterparty risk. However, the CCP bears not the net market risk, which remains with the original parties to the trade. In the years leading up to the 2007/2009 financial crisis, about 75\% of OTC transactions involved bilateral arrangements.

Is OTC trading legal in India?

The OTC derivatives markets in India are well regulated by the central bank. The Reserve Bank of India allows OTC derivatives trading so long as at least one of the parties in the transaction is regulated by the bank.

How derivatives are regulated in India?

Derivatives instruments in India are regulated by the Reserve Bank of India, Securities and Exchange Board of India (SEBI) and Forward Markets Commission (FMC). Exchange traded equity and commodity derivatives markets are regulated by Securities and Exchange Board of India (SEBI).

Is CME a CCP?

1 CME Group Inc. is the parent company of Chicago Mercantile Exchange Inc. In its capacity as a CCP (i.e., “CME Clearing”), CME is registered with the Commodity Futures Trading Commission (“CFTC”) as a derivatives clearing organization (“DCO”).