Thomas Murray has always understood and supported the value of bespoke OTC derivatives contracts, which meet highly specific economic needs not found in the regulated marketplaces. What cannot be overlooked, however, is that OTC derivatives contributed significantly to the Global Financial Crisis of 2007-2009. One factor behind this contribution was the poor information on bilateral positions. Contracts had not been confirmed with counterparties, different terms were noted on contract notes, and on and on the information gaps went: there was no overall picture in the autumn of 2008 as to who owed what to whom, and what a given counterparty’s positions and ability to meet its commitments were, not to mention the sudden realisation that nobody knew the true value of the contacts. And so the OTC markets largely froze.

The data IOSCO gathered from its members last year made it clear that individual investors continue to be serious buyers of complex, leveraged OTC products. If there were not a genuine world-wide investor protection problem, IOSCO would hardly have bothered to write extensively on the state and extent of the question, prepared suggestions for national capital markets regulators, and submitted those to public review before endorsing final recommendations.