Dodd-Frank act calls for more transparency surrounding OTCs, report claims

22 October 2010

The Dodd-Frank act urges more transparency to be introduced to OTC derivatives market, a new report has claimed.

A study by the TABB Group suggested that regulators want to see more clarity within markets across a variety of different levels.

Greater levels of transparency may lead to the creation of a number of independent valuation service providers while investors simultaneously want easier access to non-biased data sources, the group explained.

Andy Nybo, a TABB principal, the firm’s head of derivatives and co-author of the report, said that overhaul of US financial regulations will impact swap execution facilities, central clearing and lead to a new infrastructure for “lowering systemic risk” to be implemented.

“As OTC instruments begin to trade on SEFs and are centrally cleared, they will provide a wealth of benchmark data that will feed more standardized OTC valuation models. This will force a change in business models current valuation service providers use to stay competitive,” he stated.

Mr Nybo added that as technological innovation continues to sweep through the financial services industry, the most sophisticated value providers will become the most sought after.

The author of the report predicted that investment in OTC valuations will reach $249 million during 2010.

By Jim Ottewill

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