Question

What is the reason behind the recent push (actually, it's been nearly a decade in the making) for moving derivatives trading from the OTC platform to an exchange-based platform? Who were some of the leading figures behind this movement, and what might have been their motivation?

Answer 1

Moving of derivative trading from over the counter platform to the exchange platform was done for following reasons-

A.it was done in order to increase the market participation of the individuals and due to shifting of derivative from over-the-counter exchange to exchange based markets, the participation in trading of these derivatives has improved dramatically.

B. It was also done in order to increase the speculation in order to find out a fair price of securities through optimum demand and supply.

C it was also done in order to co-ordinate with growing emergence of digital brokerage and online trading.

D .it was also done in order to improve the transparency in the overall system so that various transactions could be done on the real time basis and transparency could be maintained.

E. The shift was also done in order to increase the overall volume in the market which will be generating a higher amount of income for the stock exchanges and which will also be leading to improvement of the credit market through encouragement of leverage trading.

Motivation would be to improve the market participation and transparency along with promotion of fair trade practices and market speculation so a whole lot of new investors who were trading through leverage and online trading were motivate by switching of derivative market to the stock exchanges from overover the counter exchange.