The report on over-the-counter derivatives published by the City of London Corporation on Monday has stirred up a debate among market specialists, with some warning of a “stalemate” between regulators and the industry.
Written by Lynton Jones, former head of the International Petroleum Exchange, the report warned that London risked losing its leading position as a world financial centre if policymakers rushed banks and institutions into making rash changes, such as forcing OTC derivatives to be traded on exchanges.
The report suggested that regulators might not be fully aware of the differences between products that had caused problems in the credit crisis, such as collateralised debt obligations (CDOs), and those that had not, such as single name credit default swaps.
Jones argued that forcing OTC instruments on to exchanges could damage both the OTC market and the exchanges.
OTC and exchanges in...