ISDA Publishes Paper Examining Non-Cleared OTC Derivatives and Their Importance to the Global Economy

ISDA announced the publication of a new study, "Non-Cleared OTC Derivatives: Their Importance to the Global Economy."The study outlines how the non-cleared segment of the over-the-counter ("OTC") derivatives market includes products that are significant to the economy in the following ways:

• They enable industrial companies and governments to effectively finance and manage risk in their operations and activities, and help pension funds meet their obligations to retirees;
• They help support economic growth by enabling banks to lend to corporate and individual customers; and
• They play a vital role in virtually every industry - from financial services to international trade to home mortgages.

In the study, ISDA suggests that current regulatory proposals regarding margin requirements for non-cleared OTC derivatives "pose significant threats to the continued functioning of this vital market segment." The study states that such proposals fail to fully consider the lessons learned regarding margin practices during the recent financial crisis.More generally, the study outlines ISDA's views on (i) the evolution of clearing in the OTC derivatives markets, (ii) why only some OTC derivatives will be cleared, (iii) the types and benefits of non-cleared OTC derivatives, and (iv) the impact of the regulatory proposals in this area

Click here to view study in full (links externally to ISDA PDF).