Impact of international regulation on the structure and dynamics of the global derivatives market

Bilous Kostiantyn
Ph.D. student, Odessa National Economic University, Odessa, E-mail:kbilous@kse.org.ua, ORCID ID: https://orcid.org/0000-0002-2891-3640

Cite this article:

Bilous K. (2021) Impact of international regulation on the structure and dynamics of the global derivatives market. Ed.: V.V. Kovalenko (ed.-in-ch.) and others [Vplyv mizhnarodnoho rehuliuvannia na strukturu ta dynamiku svitovoho rynku deryvatyviv; za red.: V.V. Kovalenko (gol. red.)], Scientific Bulletin of the Odessa National Economic University (ISSN 2313-4569), Odessa National Economics University, Odessa, No. 9-10 (286-287), pp. 18-27.

Abstract

The article analyzes statistics of the world derivatives market from exchange-traded and OTC derivatives in terms of time, risk categories, type of instruments, and the presence of central clearing. The statistical basis of the research was outstanding notional amounts for the global derivatives markets obtained from the Bank for International Settlements (BIS) database. The article's primary goal is to describe the structure and dynamics of the global derivatives market to determine the main trends (parameters) of the impact of international regulation on global derivative market structure and dynamics. The author considers three stages of forming the modern global derivatives market: an absence of the central regulation; implementing first central counterparties (CCP) for exchange-traded derivatives and part of OTC derivatives; and implementing Uncleared Margin Rules (UMR) for half of the OTC derivative market which was not cleared centrally by central counterparties (CCP). As a result, the presence and impact of the phased implementation of global regulation on the structure and dynamics of the world derivatives market were confirmed. The main focus of the research was considered at the OTC derivatives market due to a 90% share in the total derivatives' outstanding notional amounts in 2020. Therefore, by using the Bank for International Settlements' methodology for calculation of shares of centrally cleared OTC derivatives, the article substantiated the expediency of implementing the Uncleared Margin Rules (UMR), which introduces a mandatory exchange of the initial margin between OTC counterparties that are not going through central clearing. Finally, it was noted about creating a national Ukrainian central counterparty (CCP) through bringing Ukrainian legislation to the requirements of the European regulator.

Keywords

credit risk, derivatives, derivatives regulation, central counterparty, CCP, clearing, UMR.

JEL classification: G150, G180, G210, G230, G280; DOI: 10.32680/2409-9260-2021-9-10-286-287-18-27

UD classification: 336.76

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