IPC Survey: OTC Derivatives Trading Trend Survey (market unprepared)


An interesting survey released today from IPC Systems, shows that although financial institutions are planning to increase their trading activity in OTC derivatives, they remain unprepared to meet new regulatory trading, reporting and clearing mandates for those markets.

Key points from the “OTC Derivatives Trading Trend Survey” are:

  • Trading to Grow Significantly
    • 94 percent said their firms are already trading swaps or other OTC derivatives or plan to do so in the next six months;
    • 74 percent expect their firms’ trading volumes to increase in the next year.
  • Lack of Regulatory Preparedness
    • 36 percent reported that their company did not have a plan in place to deal with new regulations;
    • 62 percent said their firms were not well-prepared for the impending regulations;
    • Only 19 percent said the industry as a whole was well prepared to meet the regulations.
  • Mixed View on Benefits of Regulation
    • 26 percent say the benefits of new regulation far outweigh any associated costs;
    • 31 percent say the impact of new regulation will be negative leading to increases in the cost/complexity of trading with little or no benefits.
  • Increased Transparency, Reduced Risk
    • 57 percent expect new regulations to increase market and transaction transparency and 53 percent cited this benefit as moderately or critically important;
    • 43 percent said that reducing systematic risk was moderately or critically important but only 29 percent expected new regulations to actually reduce such risk.
  • View of the Future
    • 66 percent expect to see trading shift to the futures markets.
    • 19 expect the importance and value of the OTC Derivatives market to grow.
  • It’s All About Connections
    • 62 percent say their firms are or will be connected to one or more SEFs;
    • 39  percent are connected or plan to connect to more than 10 SEFs;
    • 23 percent will connect to more than 20 SEFs.
Caplin comment: The level of SEF connectivity being discussed seems high, although I assume they are talking in aggregate across all products. Even then, we would more than likely be talking of SEF aggregation, much of which Caplin has discussed in the recent Caplin white paper SDPs in a Cleared World and other posts (here, here, here , here  and here).
More on the survey here

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