Regulation, economies of scale and credit Ratings: A puzzle of declining market concentration in the OTC derivatives market

Fidelio Tata

Finance Research Letters, 2019, vol. 29, issue C, 292-296

Abstract: We explore what impact regulatory change had on the over-the-counter (OTC) derivatives market dynamics. We find that despite the increase in regulatory burden and the associated costs of derivative business for broker/dealers, there is no evidence suggesting that the competition in the OTC derivatives business among banks declined, nor that it caused an increase in concentration of market share. In fact, the opposite appears to be the case. We suggest that this can be explained by derivative end-users having to spread their OTC derivative business among a larger number of banks for risk-management reasons.

Keywords: OTC derivatives; Market concentration; Regulation (search for similar items in EconPapers)
JEL-codes: D4 G21 G28 L11 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:29:y:2019:i:c:p:292-296

DOI: 10.1016/j.frl.2018.08.005

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