tailieunhanh - An Analysis of OTC Interest Rate Derivatives Transactions: Implications for Public Reporting

In late 2009, with partial recovery, or at least a noticeable slowing, of the global downturn, a rather heated debate on exit strategies has emerged. The G-20 finance ministers agreed on “the need for a transparent and credible process for withdrawing the extraordinary fiscal, monetary and financial sector support as recovery becomes firmly secured”. But how and when to start withdrawing the support remains controversial. One group of protagonists sees unsustainable fiscal deficits and the extraordinary overhang of excess bank reserves as a portent of a monetary explosion and looming inflation. Indeed some commodity markets—notably gold and. | Federal Reserve Bank of New York Staff Reports An Analysis of OTC Interest Rate Derivatives Transactions Implications for Public Reporting Michael Fleming John Jackson Ada Li Asani Sarkar Patricia Zobel Staff Report No. 557 March 2012 Revised October 2012 FRBNY Staff repoRts This paper presents preliminary findings and is being distributed to economists and other interested readers solely to stimulate discussion and elicit comments. The views expressed in this paper are those of the authors and are not necessarily reflective of views at the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors. An Analysis of OTC Interest Rate Derivatives Transactions Implications for Public Reporting Michael Fleming John Jackson Ada Li Asani Sarkar and Patricia Zobel Federal Reserve Bank of New York Staff Reports no. 557 March 2012 revised October 2012 JEL classification G12 G13 G18 Abstract This paper examines the over-the-counter OTC interest rate derivatives IRD market in order to inform the design of post-trade price reporting. Our analysis uses a novel transaction-level data set to examine trading activity the composition of market participants levels of product standardization and market-making behavior. We find that trading activity in the IRD market is dispersed across a broad array of product types currency denominations and maturities leading to more than 10 500 observed unique product combinations. While a select group of standard instruments trade with relative frequency and may provide timely and pertinent price information for market participants many other IRD instruments trade infrequently and with diverse contract terms limiting the impact on price formation from the reporting of those transactions. Nonetheless we find evidence of dealers hedging rapidly after large interest rate swap trades suggesting that for this product a price-reporting regime could be designed in a manner that does not .