Trends in OTC derivatives

Abstract

Over the last two years, we have seen an unprecedented collapse in the global financial markets. One of the key underlying causes has been the sub-prime mortage market and the range of OTC derivatives instruments associated with that market. This paper examines the trends in the trading and processing of these OTC derivatives in the decade leading up to the collapse. It focuses on the explosive growth in use of these instruments and the issues related not only to that growth but also to the increasing complexity of the instruments and the inability of firms to adequately manage their derivatives trading from both a process and a systems perspective. It looks at how firms are prioritising their technology spends to be able to cope with the increasing complexities and regulatory constraints of the business.