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Capital Markets

Industry urged to fight equity derivatives trade confirmation backlog

Regulators hope to repeat their success in reforming practices in the credit derivatives market.

Mario Draghi, governor of the Bank of Italy
Draghi: uncertain of the scale of the confirmations problem

After successfully tackling the problem of unconfirmed trades in the credit derivatives markets, regulators have switched their attention to equity derivatives. “We suspect that there may be a lack of confirmations [in the equity derivatives market] just as there has been in other [derivative] markets, but we do not know the scale and age of the problem yet,” said Mario Draghi, governor of the Bank of Italy, speaking in Paris at the OECD’s financial stability forum on September 6.

Regulators hope that the success dealers have had in reducing trade backlogs in the credit derivatives market should be transferable to equity derivatives. However, the drive to improve back office efficiency in equities will present a host of new challenges, according to the International Swaps and Derivatives Association. “The success on the credit side is clearly going to be translated and transferable into other asset classes but there are very important differences between equity and credit derivatives, which means that the campaign, if we wish to call it that, will be different,” says Julian Day, policy director at Isda’s European office in London.

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