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Deutsche Bank Research Highlights Dodd-Frank/EMIR Inconsistencies

| FinReg

Orcun Kaya of Deutsche Bank Research recently released a study highlighting the inconsistencies between the Dodd-Frank Act and EMIR, which the firm says raises the risk involved in regulating the OTC derivatives market.    

The report was published as the US Commodity Futures Trading Commission (CFTC) also proposed rules for derivatives clearing organizations to align with international standards.  

Among the Deutsche Bank report’s findings reveals:  

  • The exact definition of standardized derivative contracts, the treatment of cross-border trades, and CCP access to central bank liquidity have yet to be clarified. 
  • The decrease in volumes in derivatives markets can largely be explained by trade compression. 
  • Despite a notable shift from dealer to CCP trades for interest rate derivatives, the actual capacity of the clearing market is much higher. 
  • Regulatory pressure to encourage standardization seems to have created little urgency for greater standardization, and the utilization of exchange platforms has remained limited.
  • Even though collateral practices would become more expensive for all market participants, non-financial corporations as counterparties are more likely to be affected by collateralization obligations in the future. 

To access the full study, please click here