Trade Transparency in OTC Equity Derivatives Markets

This paper describes the over-the-counter derivatives markets from the point of view of its structure, participants and products. We highlight the current trading venues for OTC equity derivatives, which include the inter-dealer market as well as electronic trading networks. The paper shows that the link between listed stock exchanges, options exchanges and the OTC market provides significant pre-trade transparency and price-discovery mechanisms. In terms of post-trade transparency, the issues of trade reporting, trade processing, documentation and clearing are addressed. The overall picture is that the industry is evolving toward better post-trade regulatory transparency, via electronic reporting, trade repositories and centralized clearing.