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

Which statement best describes the role of trade repositories introduced in post-crisis OTC reforms?

Trade repositories collect and store records of OTC derivative transactions so regulators can monitor exposures and systemic risk. They do not guarantee performance, which is a central counterparty function, nor do they set exchange margin levels or provide credit ratings for counterparties.

  1. AThey act as the buyer to every seller and guarantee trade performance
  2. BThey collect and maintain records of OTC derivative trades to give regulators greater transparency on exposuresCorrect
  3. CThey set initial margin levels for exchange-traded futures
  4. DThey provide credit ratings for derivative counterparties

Explanation

Trade repositories centrally store trade data so regulators can see market-wide positions and build-up of risk. Acting as counterparty to both sides and guaranteeing performance is the role of a CCP; they neither set exchange margin nor issue ratings.

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