Monetary Authority of Singapore white paper: Liquidity and Policy Analyses for Platform Trading of OTC Derivatives: A Perspective of Smaller Markets

This paper analyses the criteria for assessing when it might be appropriate to mandate the trading of standardised over-the-counter derivatives on trading platforms, in the context of smaller OTCD markets. Based on a review of academic literature, this paper examines the benefits and the challenges of a trading mandate and puts forward a two-stage assessment framework, comprising a trading infrastructure test and a product test. These tests seek to identify the appropriate conditions for implementation of a trading mandate, taking into account the associated risks of market fragmentation and regulatory arbitrage.
This paper also introduces a methodology to assess the liquidity of a product by employing a clustering technique. The clustering technique utilises a wide range of liquidity metrics observable from trade repository data and assigns a liquidity rating to each product. Lastly, this paper analyses the costs and benefits of public dissemination of anonymised transaction-level post-trade data from the TR as an alternative to improve market transparency.
The full paper is available here.

Related Posts

Previous Post
Singapore regulator issues consultation paper on short selling
Next Post
BIS: Macroeconomics of bank capital and liquidity regulations

Fill out this field
Fill out this field
Please enter a valid email address.

X

Reset password

Create an account