Study On The Development Of OTC Derivatives Market Of China

At present, OTC (over-the-counter) derivatives market develops quite slowly in China's financial market. The experiences of developed countries and global market in recent decades show that OTC derivatives market has been one of the most important parts of the global financial system. Because of its different characters from the derivatives exchanges, more and more large-scale international financial institutions participate in OTC market. The customer-tailored contracts can satisfy users better, and tend to be more attractive to users who have unique demands on risk management. It results in the rapid expansion of the market scale, wide innovation of tools categories and increasing participation of all kinds of users. Large financial institutions such as commercial banks play a role of dealers (market makers) in this market. They provide the liquidity OTC market needs and make profits from the market. To develop OTC derivatives market in China, it is necessary to improve the risk management function, the financial efficiency and competitions among financial institutions. However, by referring to the global experiences, we should pay attention to the harmonization of financial supervision and information disclosure in the process of market construction.To some extent, the effects of OTC derivatives market on global financial system have gone beyond what the traditional financial products have brought. Therefore, it turns to be a vital ground on which all the institutions have to take into consideration while carrying out their risk management businesses. However, financial system in China in the long run attached little importance to risk management, and its studies. Therefore, it is helpful to develop or fulfill financial system in China to study the possibility of carrying through the OTC derivatives trades. According to the descriptions and analysis of global OTC derivatives market, the author thinks it is necessary for China to develop the operations. Exchange rate, interest rate, risk management of credit market and China's financial institutions to reforming needs provide the OTC derivatives a very good opportunity to develop in China. More importantly, the space are very wide when use these OTC derivatives market to meet risk management demands. However, OTC derivatives market is still at the beginning stage in China, there is a huge gap in trading type, quantity or the market environment between domestic and foreign mature market. Combine with China's actual situation, we are going to study the foreign existing experience in regulation, legal system, accounting system and product innovation, speed up marketization process of foreign exchange, interest rate, perfect market supervision system, promote domestic development of OTC derivatives market.Firstly, this paper clarifies the study background, objective, content, method and thread. Secondly, this paper reviews the former studies and clarifies the conception and theories, which is the base and starting point of the study. Thirdly, this paper studies the structure and determine the development necessity of OTC derivatives market. At last, this paper tries to put forward some opinions about how to develop the OTC market in China.