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You don't need complex derivatives to blow yourself up.

Some hedge funds are taking huge positions on listed derivative markets. It's just that when they fail through listed markets the boom is spread a bit to the clearing exchange members and it happens earlier through margin calls.

Whereas in the OTC market you have only one counterparty that takes the boom (or a chain of counterparties).

AFAIK, there is no more regulatory reporting requirement in OTC than in listed.

Banks are supposed to monitor their risk and regulators supposed to monitor banks risk monitoring. If a bank blows up, the boom goes to in order:

  1. shareholders
  2. bondholders
  3. deposits of clients in the bank

Part 3 is you and me money. Did you get a dividend for the risk you're taking? :)
by Laurent GUERBY on Mon Jun 18th, 2007 at 05:35:55 PM EST
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