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FRM Part I · FRM Exam Part I · Exchanges and OTC Markets

A regulator wants to improve its ability to see the build-up of counterparty exposures across dealers in the OTC derivatives market. Which post-crisis reform most directly serves this purpose?

Requiring OTC trades to be reported to trade repositories most directly helps regulators see counterparty exposures. Repositories gather data on outstanding contracts and positions across market participants, giving supervisors transparency into concentrations and interconnections that were opaque before the crisis.

  1. ARequiring all derivatives to be physically settled
  2. BRequiring OTC trades to be reported to trade repositoriesCorrect
  3. CRaising the minimum trade size on exchanges
  4. DProhibiting dealers from acting as principals in swaps

Explanation

Trade repositories collect data on outstanding OTC contracts, giving regulators visibility into positions and concentrations. Physical settlement, minimum exchange trade sizes and principal-trading bans do not provide this transparency.

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