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Issues in Market Transparency for Credit Derivatives: Price, Volume, and Exposure Information

Issues in Market Transparency for Credit Derivatives: Price, Volume, and Exposure Information. Presented to the IMF-FSB Users Conference 8 July 2009 Christopher Tsuboi Federal Reserve Bank of New York. Motivations and policy objectives. Supervisory efforts in OTC derivatives to 2008

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Issues in Market Transparency for Credit Derivatives: Price, Volume, and Exposure Information

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  1. Issues in Market Transparency for Credit Derivatives: Price, Volume, and Exposure Information Presented to the IMF-FSB Users Conference 8 July 2009 Christopher Tsuboi Federal Reserve Bank of New York

  2. Motivations and policy objectives • Supervisory efforts in OTC derivatives to 2008 • Operational efficiency • Centralized infrastructure • Standardization • Automation • 2008: Significant market events • Volatility and drop in trading liquidity -> uncertainty in pricing • Opacity and complexity of bilateral positions and collateralization -> uncertainty in bilateral exposures • “Market transparency” as an explicit policy objective • Greatest focus on credit derivatives

  3. Dimensions of market transparency: defining terms to describe information of interest • Scope of transparency • Market participants • Regulators • The public • Types of transparency • Pre-trade transparency • Post-trade transparency • Transaction transparency • Position transparency • Technical determinants of transparency • Standardization • Automation • Centralized infrastructure

  4. The state of market transparency in credit derivatives: What information is currently available? • Macro statistics • BIS • ISDA • Position information • DTCC Trade Information Warehouse • Central counterparty clearing platforms (CCPs) • Price information • Market maker consensus prices • CCP end-of-day settlement prices • Transaction information • Generally unavailable • Credit event information • ISDA • Creditex • DTCC

  5. Some challenges • Universal coverage of position/exposure data • Improving the richness and utility of position/exposure data • Counterparty and reference entity representation • Breakdowns: (e.g. sector, geography, product type) • Discrete, near real-time transaction reporting • Global regulatory coordination • CCP Regulators’ Workshop • BIS CGFS Working Group in Credit Risk Transfer Statistics

  6. Next steps • Continue to drive standardization, automation, and use of centralized infrastructure • Expand and enrich credit derivative position data in the DTCC TIW • Continue to develop cross-jurisdictional data reporting frameworks

  7. Questions?

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