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Participation of Private pension funds in the OTC derivatives market


V.V. Kalmykov

Recent financial markets practice of tightening regulation of OTC derivatives gave positive effect. Basel 3, EMIR, Dodd-Frank act and some other national regulations (like Volker rule) restricted opening unsecured positions in OTC derivatives and proclaimed new regulation, proposed to impose limitations on trading OTC derivatives. Uncertainly, most of the financial institutions do not hesitate to override this rules and abuse existing regulations. The most actual problem is that more frequently OTC derivatives become popular through pension funds and mutual funds. Due to high volatility on the markets of OTC derivatives and high risks this aspect becomes a serious problem and could cause systemic misbalances in the sphere of social security. Moreover this risky products bears high risks of defaulting due to cross-default conditions, which are included in most of them. Above mentioned makes empirical analysis of the existing schemes highly relevant and timely in order to provide more confidence and protect pension funds from defaulting under OTC derivative contracts obligations.

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