OTC Derivatives: Clearing the Road for Progress

A new report from Aite Group focuses on current issues in the over-the-counter (OTC) derivatives marketplace, the makeup of the OTC derivatives market, issues surrounding counterparty risk management, and the impact of pending legislation and regulation.

Based on ongoing conversations with members of the buy- and sell-sides, Aite Group finds initial evidence that the worst is over for the over-the-counter derivatives market and that OTC derivatives asset classes are returning to growth. With growth comes challenges, including counterparty risk, which is consistently considered a key concern of the derivatives marketplace. Firms suggest that the need for better reconciliation and reporting is crucial, especially where they must collect information from predominantly manual processes and compile it to mitigate internal risk or appease regulators.

“Aite Group believes that significant changes are ahead for the OTC derivatives market, as increased risk management, automation, and regulation become increasingly necessary,” said Fritz McCormick, senior analyst with Aite Group and author of this report. “Market participants will have no choice but to examine their needs and implement technologies – either industry utilities or internally deployed solutions – that can support best practices and regulatory compliance while acting as a platform for the ongoing growth of the OTC derivatives market.”


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