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OTC Derivatives in Asia and Latin America: Evolution and Regulation

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3 February 2012

Abstract

The Asian OTC derivatives market is much larger than its Latin American counterpart. For example, Singapore is the leading OTC interest rate derivatives market, with US$35 billion in average daily turnover in April 2010, followed by Hong Kong (US$18 billion), Korea ($11 billion), and Brazil ($7 billion). Similarly, Hong Kong is the leading OTC FX derivatives market, with $194 billion in average daily turnover in April 2010. Singapore is second in size with $175 billion, but all the other Asian and Latin American markets are quite small.

In a new report, OTC Derivatives in Asia and Latin America: Evolution and Regulation, Celent discusses the evolution of trading and regulatory infrastructure in the OTC derivatives markets in Asia and Latin America. These two regions are the main growth engines in the emerging markets, and hence it is important to understand the current scenario for OTC derivatives trading.

“The economic growth in emerging markets in Asia and Latin America is ideally suited to the greater adoption of OTC derivatives,” says Anshuman Jaswal, Celent Senior Analyst and author of the report. “However, exchange-traded derivatives have been quite popular in these markets, and it is hoped that greater standardization of OTC derivatives as a result of central clearing would make them more appealing to investors.”

This report begins with a comparison of the turnover across the global emerging and advanced markets. It then looks at the overall volumes in the Asian and Latin American markets, followed by a discussion of the turnover for OTC interest rates and FX derivatives in the leading markets such as Hong Kong, Singapore, Brazil, and Mexico. After an analysis of the recent levels of trading, there is a section on the regulatory framework for OTC derivatives in the leading national markets across a number of parameters, such as standardization, central clearing, and transparency.