Lukken praised the development of the derivatives market in
Lukken discussed the opportunities and challenges inherent in the transition from over-the-counter trading to exchanges and clearinghouses. "The changes taking place around the world to transform the OTC market are profound and will make exchanges and clearinghouses even more important than they already are," Lukken said. "There is great value in the exchange and clearinghouse model for price discovery and risk management."
Lukken urged international regulators to stay alert to the risk that comes from centralizing activity in clearinghouses. "The migration of the swaps market to the exchange/clearing model means that the amount of risk moving into the derivatives clearinghouses will increase dramatically," he warned.
In this context, he emphasized the importance of implementing international standards for financial market infrastructures and highlighted the critical role of the clearinghouse member firms.
He also stressed the importance of international regulatory cooperation to maintain healthy markets and encourage regulators to move towards mutual recognition or substituted compliance as a mechanism for cross-border regulation and oversight. "I am hopeful that regulators will find value in finding ways to cooperate that allows global markets to exist while effectively protecting the marketplace and its participants.
The full text of Lukken's remarks, as prepared for delivery, is available here. http://www.futuresindustry.org/downloads/Lukken_Keynote_Address_at_Shanghai_Derivatives_Market_Forum-May_28_2014-press_release.pdf
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