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Originally Posted by . . . Yrs to Go
Had government mandated that these products be traded on an exchange from the very beginning, this part of the problem would have been averted.
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Won't there still be an over-the-counter market for these products even if they have an exchange? There's a futures market for currencies, but its volume is dwarfed by over-the-counter transactions.
I agree that the idea of a central exchange with contract matching and variation margin is a good thing (in the case of CDS it also will provide transparent prices), but so long as there continues to be a large over-the-counter market running in parallel, it seems to me that much of the potential for systemic risk will remain.
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