Asian Banker SummitMarketsExchanges ConferenceRegulation in Derivatives Markets.docx

Asian Banker SummitMarketsExchanges ConferenceRegulation in Derivatives Markets.docx

《Asian Banker SummitMarketsExchanges ConferenceRegulation in Derivatives Markets.docx》由会员分享，可在线阅读，更多相关《Asian Banker SummitMarketsExchanges ConferenceRegulation in Derivatives Markets.docx（7页珍藏版）》请在冰豆网上搜索。

AsianBankerSummitMarketsExchangesConferenceRegulationinDerivativesMarkets

Printedfrom:

http:

//www.seccom.govt.nz/speeches/2010/190410.shtml?

print=trueonTue12October2010

RegulationinDerivativesMarkets

JaneDiplockAOChairman,SecuritiesCommissionNewZealand&ExecutiveCommittee,IOSCO

AsianBankerSummit-MarketsandExchangesConference

19April2010,Singapore

I'mdelightedtobebackinSingapore,andinsuchprestigiouscompany,tocontribute-andlearnfrom-thisimportantconference:

NewLandscapes,NewPlayers,NewRules.

Thisisindeedatimelyconferenceanddebate.JustyesterdaymorningonCNBCIheardPresidentObamadescribingthederivativesmarketsasbillionsofdollarssloshingaroundinthesystem,tradingunderthecoverofdarkness.FromallaroundtheworldtherehascomeacallforgreaterlighttobeshedonthetradingofderivativesandGovernmentsareconsideringandreflectingonthebestwaytodothis.

ThisweekhasshockedtheworldwiththedislocationcausedbyavolcanoinIceland.Suddenlyplanesarehaltedandtheplansofmillionsarethrownintodisarray.

Theglobalfinancialcrisishitmanyinthesameway.Itseemedtocomeoutofaclearbluesky.Itleftthemreelingwithshock,unabletotakeintheirlosses.Somewillsufferfromtheaftershocksfortherestoftheirlives.Forallofus,onewayoranother,thefinanciallandscapechangedforever.

Oneofthedifferencesbetweenaglobalfinancialcrisisandavolcaniceruptionis,ofcourse,thatweremainunabletopredictthesenaturaleruptionsortoblameothersforthem.Financialcrises,ontheotherhand,promptanimmediatesearchforhumanagencyandblame.

It'sonlynowthatthefirstshockhassubsidedthatthemostchallengingquestionhascomeintofocus:

whatdoweneedtodoinordertopreventsuchameltdownoccurringagain?

Theregulatoryresponsetothecrisismustbeonethatencouragesthriving,transparent,deepliquidmarkets,anddoesnotreduceinnovationinthosemarkets.Itmustbebasedonappropriateresearchanddata,andevidenceofthepotentialimpactregulatoryinterventionislikelytohave.

Itshouldalsobecalibratedandrefinedthroughconsultationwithmarketparticipants,particularlythosewhosebusinesseswouldbemostcloselyaffected

Derivativestradingmarketshavebeentargetedasaprimescapegoatfortheglobalfinancialcrisis.Infact,overthelastcoupleofdecadestherehasbeenasmuchdistrustofderivativesastherehasbeenenthusiasm.In2002,oneoftheUS'srichestmenandmostsuccessfulinvestors,WarrenBuffett,observedthatderivativesweretimebombsbothforthepartiesthatdealtinthemandtheeconomicsystem:

"financialweaponsofmassdestruction,carryingdangersthat,whilenowlatent,arepotentiallylethal."1

Theseobservationsweremadebeforetheglobalfinancialcrisishit.Sincethen,boththeblameandtherebuttalshavebeenmorevociferous.

DerivativesMarkets

Hedgingofpositionshasbeenacommonwayofmanagingriskforaverylongtime.:

Theyweredevelopedtomanageandlowerrisk,andcrudeversionsofderivativeshavebeeninuseforcenturies.Derivativesbeganbeingsoldoff-exchangeintheearly1980s.Today,theyaccountforvastsumsofmoney-theBankforInternationalSettlementsestimatesthetotaloutstandingnotionalamountat$684trillion（asofJune2008）.2

Derivativescertainlybringlegitimatebusinessbenefits.Theuseofderivativestohedgepositionsinbusinessandtooffsetriskiswellunderstoodandanimportantbusinesstool.

TheBaselCommitteeonBankingSupervisionhaspointedoutthatcreditriskprotectionthroughcollateralpledgedagainstpotentiallossesinderivativestransactionsisacornerstoneofriskmanagement.3

Unfortunately,though,thecrisisdemonstratedthatderivativestradingcanalsoconcentrateandheightenrisk.Somecommentatorshavedemonisedderivativesasaproductclass.Idonotagreewiththisanalysis.Nevertheless,amisunderstandingofderivativescanexposemarketparticipantswhousethemtosignificantrisk.Theglobalfinancialcrisishighlightedthecounterpartyrisk,where,eventhoughtheinstrumentmightwellhavebeensound,thecounterpartycouldnotpay.

TheInternationalOrganizationofSecuritiesCommissions'（IOSCO）reportonthesubprimecrisispublishedinMay20084highlightedthefactthatanumberofstructuredproductsrelyingonleveragemagnifiedbothrisksandreturns.

AJanuary2010reportfromtheJointForum5madeupofthefinancialsector'sinternationalstandard-settingbodies,includingIOSCO,remindsusthat"oneofthefactorscontributingtothecrisiswastheinadequatemanagementofrisksassociatedwithvarioustypesofproductsdesignedtotransfercreditrisk.Thisresultedinseverelossesforsomeinstitutions.Theseproductstransferriskswithinandoutsidetheregulatedsectors."

Myviewisthatderivativestradingcontributedtotheglobalfinancialcrisis,butwasnotthemaincause.Likepoorvaluations,miss-sellingofproducts,misuseofoff-balancesheetvehiclesandpoorlyunderstoodsercuritisations,theywereacontributor.Somederivativesdestroyedvaluebecauseofsignificantopacityinpricingvaluation,andbecausemanyweretradedoverthecounterratherthaninregulatedexchanges,andthereforetherewasanabsenceoftransparencyinrelationtopositions.

AsGaryGensleroftheUSCommodityFuturesTradingCommissionhasobserved,6thecrisisdemonstratedthatOTCderivativesaddedleveragetothefinancialsystem,withmoreriskbeingbackedupbylesscapital.

Derivativesmarketscontinuetogrowinsize,productrangeandcomplexity,withcomplextradesmakingupanincreasingproportionofnewover-the-counter-and,therefore,unregulated-transactions.

Somehedgefundsandfinancialinstitutionsthattradederivativesdosousingverysmallamountsoftheirowncapitalandverylargeamountsofborrowedmoney.Theeffectofallthisistomakethesederivativesextremelyrisky,whileoftenobscuringthatfact.

Aglobalpushforregulation

Ifirmlybelievethat,ifwearetobuildaframeworkthatwillassistusinavoidingfuturefinancialcrisesinglobalmarkets,wemustbepreparedtoworktogethertobuildaneffectiveregulatoryframeworkforOTCderivatives-onethatwillfunctionalongsidetheregulatoryframeworksforsecuritiesandon-exchangederivatives.

Twenty-firstcenturyfinancialmarketsarenolongergeo-politicalislands.Moneymovesaroundtheworldandbackagainatthetouchofamouse,andregulatoryframeworksmustbejustasagileatleapingborders.

Regulatoryreformmustbethoroughanditmustbeinternational.Nothinglesswilldo.

ThisiswhatG20leadersbelieve.LastyearinPittsburgh7theyagreedthat,by2012,allstandardisedOTCderivativecontractsshouldbetradedonexchangesorelectronictradingplatforms,andclearedthroughcentralcounterparties.Non-centrallyclearedcontracts,theysaid,shouldbesubjecttohighercapitalrequirements.

TheBaselCommittee'sMarch2010report

TheBaselCommitteeonBankingSupervisionrecentlypublishedthefindingsofitsstock-takeoflegalandpolicyframeworksforcross-bordercrisesresolution.8Itsaidthecrisisrevealedthat,althoughlargefinancialinstitutions'cross-borderderivativesactivitiescouldbeinternationallybeneficial,theybroughtwiththemsignificantrisksofcross-bordercontagion.

Thecommitteesaidpolicymakerscouldencouragemoreuseofriskmitigationmechanismsandstrengthenlegalframeworkstoensuretheirenforceability.Thiswouldhelpreduceinterdependenciesamongindividualmarketparticipants,betterinsulatingthemfromthefailureofindividualfinancialinstitutions.Thiswouldalsoreducesystemicriskandmakefinancialormarketfunctionsmoreresilientduringacrisis.

Itrecommendedgreaterstandardisationofderivativescontracts,migrationofstandardisedcontractsontoregulatedexchangesandtheclearingandsettlementofsuchcontractsthroughregulatedcentralcounterparties,andgreatertransparencyinreportingforOTCcontractsthroughtraderepositories.

Thecommitteenotedprogressoverthelasttwodecades,withlegalreformadoptedinmostmajorjurisdictions.Itsawlessprogressinsomeemergingmarketjurisdictions,andsaidfurtherconvergenceandstrengtheningofnationalframeworkswasstronglydesirable.

IOSCOwork

IOSCOwasquicktoreactwhenthesubprimecrisishit.IthadidentifiedconcernsanddecidedtoinitiateworkasearlyasNovember2007,anditsreportonthesubprimecrisiswasreleasedinMay2008.

Thereportnotedtherisksposedbysomecollateralizeddebtobligations（CDOs）.Byrelyingonleverage,investorsinsuchCDOswouldmagnifyreturnsbutatsignificantrisk.Itmaderecommendationstobetterprotectpublicmarketsfromthespillovereffectscausedbyactivityonprivatemarkets.

Earlythisyear,theJointForumreleasedareviewonregulationrequestedbytheG20throughtheFinancialStabilityBoard.Itanalysesandmakesrecommendationsonkeyissuesarisingfromdifferentialregulationintheinternationalbanking,securities,andinsurancesectors,focusingonunregulatedorlightlyregulatedentitiesoractivitieswheresystemicriskishigh.

TheissueofcreditrisktransferassociatedwithderivativeswasaddressedbytheJointforumin2005andlaterin2007.

InNovember2008,IOSCOinitiatedareviewofthescopeoffinancialmarketsandinparticularunregulatedfinancialmarketsandproducts.Thisresulted,afterextensiveconsultationwithindustry,inafinalreportinSeptember2009.9

Thisreportexamineswaystointroducegreatertransparencyandoversightinunregulatedfinancialmarketsandproducts.Itaimstoimp