Tuesday, May 11, 2010

OTC Derivatives Market in India

By Dayanand Arora and Francis Xavier Rathinam:

Abstract: The OTC derivative market in India, though in its infancy, is an interesting case, because it came out unscathed in the present global crisis. The paper seeks to prove the point that this is because of India’s cautious regulatory framework and support institutions such as a centralised counter party (CCP). This case study about the Indian OTC derivativesmarkets can serve as a model for other developing countries.

The paper analyses the regulatory structure of the Indian OTC derivatives market, particularly the role of OTC-traded versus exchange-traded derivatives, the role of reporting platforms and the role of a centralized counterparty (CCP) for the transparent functioning of the market. It further explores some of the open issues, such as competition in reporting platforms and counterparty services and supervision of the off-balance sheet business of financial institutions, to ensure stable growth of OTC derivatives markets.

Read the Vox column here, and download the whole paper here: www.esocialsciences.com/data/articles/Document1352010140.3762781.pdf

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