Shedding Light on Dark Markets: First Insights from the New Eu-Wide OTC Derivatives Dataset

45 Pages Posted: 5 Nov 2020

See all articles by Jorge Abad

Jorge Abad

Centre for Monetary and Financial Studies (CEMFI)

Iñaki Aldasoro

Bank for International Settlements (BIS)

Christoph Aymanns

London School of Economics & Political Science (LSE) - London School of Economics; University of St. Gallen - School of Finance

Marco D'Errico

University of Zurich; European Systemic Risk Board

Linda Fache Rousová

affiliation not provided to SSRN

Peter Hoffmann

European Central Bank (ECB) - Directorate General Research

Sam Langfield

European Central Bank

Martin Neychev

affiliation not provided to SSRN

Tarik Roukny

Massachusetts Institute of Technology (MIT); KU Leuven - Faculty of Business and Economics (FEB)

Date Written: September, 2016

Abstract

Policy is only as good as the information at the disposal of policymakers. Few moments illustrate this better than the uncertainty before and after the default of Lehman Brothers and the subsequent decision to stand behind AIG. Authorities were forced to make critical policy decisions, despite being uncertain about counterparties’ exposures and the protection sold against their default. Opacity has been a defining characteristic of over-the-counter derivatives markets – to the extent that they have been labelled “dark markets” (Duffie, 2012). Motivated by the concern that opacity exercerbates crises, the G20 leaders made a decisive push in 2009 for greater transparency in derivatives markets. In Europe, this initiative was formalised in 2012 in the European Markets Infrastructure Regulation (EMIR), which requires EU entities engaging in derivatives transactions to report them to trade repositories authorised by the European Securities Markets Authority (ESMA). Derivatives markets are thus in the process of becoming one of the most transparent markets for regulators. This paper represents a first analysis of the EU-wide data collected under EMIR. We start by describing the structure of the dataset, drawing comparisons with existing survey-based evidence on derivatives markets. The rest of the paper is divided into three sections, focusing on the three largest derivatives markets (interest rates, foreign exchange and credit).

Keywords: derivatives markets, OTC, financial networks

JEL Classification: G15, G18

Suggested Citation

Abad, Jorge and Aldasoro, Iñaki and Aymanns, Christoph and D'Errico, Marco and Rousová, Linda Fache and Hoffmann, Peter and Langfield, Sam and Neychev, Martin and Roukny, Tarik, Shedding Light on Dark Markets: First Insights from the New Eu-Wide OTC Derivatives Dataset (September, 2016). ESRB: Occasional Paper Series No. 2016/11, Available at SSRN: https://ssrn.com/abstract=3723342

Jorge Abad (Contact Author)

Centre for Monetary and Financial Studies (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
Spain

Iñaki Aldasoro

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Christoph Aymanns

London School of Economics & Political Science (LSE) - London School of Economics ( email )

United Kingdom

University of St. Gallen - School of Finance

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Marco D'Errico

University of Zurich

Andreasstrasse 15
Zurich, 8050
Switzerland

European Systemic Risk Board ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Linda Fache Rousová

affiliation not provided to SSRN

No Address Available

Peter Hoffmann

European Central Bank (ECB) - Directorate General Research ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Sam Langfield

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Martin Neychev

affiliation not provided to SSRN

No Address Available

Tarik Roukny

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

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