Putting Forward Regulation

Transcription

1 Puttig Forward Regulatio No-Deliverable Forwards ad the 1062 Amedmet to the Russia Civil Code ( ) Sveta Milyaeva 3rd year PhD studet Sociology Derivatives Markets are Itegrated ad Costitutive to Moder Society Politics is determied by fiacial markets BBC News 15 May 08: Spatial ad temporal itegrity of derivatives markets Russia default ad fiacial crisis (1998): Possible collapse of Russia bakig system Global crisis: LTCM hedge fud bakruptcy The Fed lowerig iterest rates Dot.com & housig bubbles

2 Fiacial derivatives: Vast ad Fuzzy The global derivatives market expads to $516 trillio for every huma beig o earth A example of a derivative: a forward a agreemet to buy/sell a exchage rate for a specified price i the future markets uderstad G7 message Fiacial markets are a moster ad must be put back i its place Derivatives are the ew tickig time bomb How to Remove the Fuzziess? Brig the Social Back to the Markets Bruo Latour: to trace the coectios Michel Callo: a athropology of the markets Doald MacKezie: the material productio of virtuality The materiality of fiacial markets ivolves physical objects, techological system ad huma bodies, but also the legal systems, cultures, procedures, beliefs ad social relatios that objects ad bodies express, make possible, are shaped by ad emeshed i. Latour/Callo/MacKezie: scales are t stable

3 Is a Derivative a Bet? Derivatives Physically settled (the cotracted item is delivered) Cash settled (paymet is made i cash, o delivery) If a bet geerally illegal or ueforceable The Law is Materiality of the Derivatives Market. The Law 1062 Article of the Russia Civil Code (gamblig is ot legally eforceable) The Market The Iterbak / forward market

4 The / Forward Cotract Baks ad their cliets: corporatios + ivestmet fuds Isurace agaist exchage rate movemets + profits makig / Forward 26 May 26 Jue exchage rate settlemet The / Cash-Settled Forward / Cash-Settled or No-Deliverable Forward: Roubles are ot delivered: 26 May 26 Jue exchage rate settlemet i $ From a maagemet poit of view it is good, because settlemet risk is less, the moey is ot kicked about. Ad if you do t aim at buyig moey physically, but at hedgig market risk [possible loss due to price fluctuatios. S.M.], the you simply eed to get a equivalet of this very market risk (P iterview).

5 The / Cash-Settled Forward Market: Segmeted Iteratioal Offshore Cross- Border Domestic Oshore Lodo Bak B Lodo Bak A Mosco w Bak A Mosco w Bak B The Reaso: Russia Fiacial Crisis 1998 Cross-Border Market Lodo Moscow Bak Bak August Rouble is depreciated : $1/ 6$1/ 16 Moscow baks defaulted o their obligatios Losses: $ 50 billios

6 The Implicatio of the Segmetatio Segmeted = o-liquid: / cash-settled forward market is ot liquid. liquid: large umber of buyers ad sellers, quick deals ad fair prices. Larger Cross-Border Market - More Liquid Rouble Forward Market Iteratioal Offshore Cross-Border Domestic Oshore Lodo Bak B Lodo Bak A Mosco w Bak A Mosco w Bak B

7 The Law: The 1062 Article of Russia Civil Code The Article 1062 The demads of citizes ad juridical persos coected with the orgaisatio of games ad bettig or participatio therei shall ot be subject to judicial defece The Social: The Amedmet of 1062 Article (2007) The Article 1062 The demads of citizes ad juridical persos coected with the orgaisatio of games ad bettig or participatio therei shall ot be subject to judicial defece The Amedmet The rules of this Article shall ot apply to claims related to participatio i trasactios where a party [ ] has a obligatio to pay moetary amouts depedig o variatios i [ ] rates of currecy exchage [ ]. Such claims shall be subject to judicial eforcemet

8 The Two Regulators The Bak of Russia is the Cetral Bak of the Russia Federatio. It is the baks chief regulator. Bak of Russia FFMS is a executive body that cotrols ad supervises activity i the fiacial markets. FFMS The Regulatory Coflict ( ) The itersectio of the regulatory domais The regulators legal iitiatives are differet: The Cetral Bak - the cosolidated derivatives laws The FFMS - the amedmet to the Civil Code

9 Neither a bomb, or a moster: The materially (legally) produced trade The Market Productio The regulatory coflict the delayed amedmet the o-liquid forward market