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End Users Say Derivatives Markets Fragmented from Post-crisis Regulation
Practical Law Legal Update 6-610-0043 (Approx. 2 pages)
End Users Say Derivatives Markets Fragmented from Post-crisis Regulation
by Practical Law Finance
| Published on 28 Apr 2015 • USA (National/Federal) |
ISDA released a survey of derivatives end users revealing that a majority see market fragmentation, reduced liquidity and higher cost of derivatives as a result of recent regulatory changes.
- 55% of derivative end users think that market fragmentation has occurred along geographic lines as a result of recent derivative regulatory change.
- 56.6% of derivative end users believe this market fragmentation causes a detrimental effect on their risk management capabilities.
- 36.2% of derivative end users feel that liquidity has deteriorated over the past year.
- 34.4% of derivative end users thought the number of dealers willing to offer prices on derivatives transactions had shrunk over the past year.
- 53.1% of derivative end users thought the cost of hedging had increased over the past year.
Survey participants believe that market fragmentation occurs as a result of:
- The introduction of new regulations in different jurisdictions at inconsistent times.
- A difference in the rules for participants in different jurisdictions.
These differences create difficulty in operating trades across borders which in turn has started to create an inability for end users to hedge their risk effectively.