Global regulatory initiatives such as MiFID II, EMIR and Dodd-Frank have the potential to create significant new business opportunities for financial institutions and market infrastructure providers such as exchanges. But too many organisations seem either unable or unwilling to grasp this simple fact. Rather than burying their heads in the sand, as many appear to be doing, market participants should be embracing these new frameworks and putting their resources behind innovations that will respond to this new world order.
As competition grows and calls for transparency increase, I
would have expected to see market participants rise to the
challenge of redefining the over-the-counter (OTC) derivatives
market. Nobody should be relying on governments or regulators
to push OTC derivatives business their way. Yet many exchanges
appear stifled by a fear of innovation, which threatens to
prevent them from capitalising on the opportunities being
created by the changing regulatory regime.
I believe that one reason for this
dearth of innovation in interest rate derivatives is that the
market has for far too long been dominated by a small group of
large OTC players who have been resistant to change and,
indeed, have had no incentive to do so. The market is
characterized by inefficiencies with those outside of the
golden group not able to access trading at fair
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