The Research On The Regulatory Regime Of The OTC Financial Derivative Market

After the global financial crisis, the public begin to pay attention to the OTC(Over-the-counter) financial derivatives because of their enormous risks. Currently, it is a very hot topic that how to reinforce the regulatory system of the OTC financial derivative market, dealing with the risks, especially the system risk, of the OTC financial derivative market. The objective of the thesis is to approve the necessary of the outside regulation for the OTC financial derivative market and propose approaches to improve the regulatory system of the OTC financial derivative market, according to the defects of the market.Taking advantage of the comparative, empirical and economic Analyzing ways, this paper tries to make a relatively comprehensive analysis on such topic. This paper consists of three Chapters and amounts to 23,000 Chinese characters. The first chapter is the summary of the regulation for the market. The second chapter is the introduction of the current regulatory regime of the OTC financial derivative market, revealing the defects of the regulatory system. The third chapter is to introduce the approaches to improve the regulatory system, solving the problem of the system and fulfilling the regulatory objectives.Chapter One, is the summary of OTC financial derivative market and the analysis of the necessary of the regulation. In Section One financial derivative is defined as a financial contract dealing with risks of the financial market. The following is chief introduction on its history, legal characteristics and basic categories. Then Section one mainly renders functions, characteristics and market-position of its OTC market. The Section Two demonstrate the necessary of the regulation for the OTC financial derivative market. The OTC market is not a free competitive market, and the contract inadequacy of the OTC market lead to the information asymmetry of the participants of the market. Especially because of the negative externalities of the OTC market, there is severe system risk of the OTC financial derivative market and the real economy. The end of the paper is the empirical analysis of the insolvency of the Lehman Brothers, approving the necessary of the regulation.Chapter Two introduce the current regulatory system of supervision over the OTC financial derivative market. Author pointing out that the governmental regulation always leave the OTC market alone, so the negative externalities of the market can not be restrained effectively. Because of the interest conflict, the intermediary agent and the self-regulatory organization usually can not provide impartial regulation for the market. The international regulation is also too weak to be effective in the market.Chapter Three is focusing the improvement of the regulatory regime of the OTC financial derivative market. First of all, the author claim that the governmental regulation should be reinforced, and the capital requirement of the system-important institution should be increased to restrain the negative externalities. Meanwhile, the information disclosure regime should be improved to decrease the information inadequacy of the market. Additional, we need to change the operation model of the intermediary agents to eliminate their moral risk. We have to take advantage of the function of the Exchange and the Central Clearing Party to improve the self-regulatory capacity of the market. And the standard product should be central cleared. At last we should improve the international regulation to deal with the globalization of the market, changing the current situation that the international regulation is actually nothing.