CFTC Chairman Gary Gensler on OTC Derivatives Reform

CFTC's Gary Gensler gave an interesting speech a few days ago where he discussed the future reform of the OTC Derivatives Market. While he didn't specifically discuss Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term it is probably one of the products that this proposed reform concerns.

OTC Derivatives - are called this way because there is no central Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term for their trading, therefore they are traded Over the Counter, that is typically not between a seller and a buyer but rather from a corporation that issues these products. It also acts as a counter-party in such trades which is the most problematic issue of them all.

What you will find below is a very simplistic explanation of the OTC market and the reasons behind the proposed reform. It is still an interesting read and one of the outcomes of this reform can easily be a creation of a forex marketplace for US FCMs.

Remarks of Chairman Gary Gensler, “OTC Derivatives Reform”, Council on Foreign Relations -