Columbia International Affairs Online: Working Papers

CIAO DATE: 04/2015

The Risk of OTC Derivatives: Canadian Lessons for Europe and the G20

Chiara Oldani

February 2015

Centre for International Governance Innovation

Abstract

Over-the-counter (OTC) derivatives played an important role in the buildup of systemic risk in financial markets before 2007 and in spreading volatility throughout global financial markets during the crisis. In recognition of the financial and economic benefits of derivatives products, the G20 moved to regulate the use of OTC derivatives. Attention has been drawn to the detrimental effects of the United States and the European Union to coordinate OTC reform, but this overlooks an important aspect of the post-crisis process: the exemption of non-financial operators from OTC derivative regulatory requirements.