OTC derivatives market in India: recent regulatory initiatives and open issues for market stability and development

Abstract

In the wake of the present financial crisis, which is believed to have been exacerbated by over-the-counter derivatives, increasing attention is being paid to analysing the regulatory environment of these markets. In this context, we analyse the regulatory framework of the over-the-counter derivatives market in India. The paper, inter alia, analyses how a good reporting system and a post-trade clearing and settlement system, through a centralized counter party, has ensured good surveillance of the systemic risks in the Indian over-the-counter market. This research paper also explores those open issues that are important to ensure market stability and development competition among centralized counterparties and better supervision of the off-balance sheet business of financial institutions.