However, I suspect that these efforts will not fully succeed without measures to develop marketplaces and infrastructures that promote greater transparency for all OTC derivatives activity, including more and higher-quality information on prices and transaction volumes. OTC derivatives dealers have natural incentives to favor opaque, decentralized markets that preserve their information advantage relative to other participants. The greater profit margins that derive from this advantage create incentives to favor more bespoke OTC derivatives over more standardized OTC instruments. Making more and better pricing information available to a wider range of market participants will increase competition and lessen the profit incentives that stem primarily from the opacity of these instruments and markets. Improving transparency should make the benefits that stem from standardization such as increased liquidity, reduced transaction costs, and lower counterparty risks more dominant, helping push the evolution of the OTC derivatives market in the direction of greater standardization and homogeneity. This doesn’t mean that bespoke products will vanish. They will continue to exist. But they will exist primarily because they better serve the needs of the OTC derivatives customer, not because they create an informational asymmetry that allows rents to accrue to the securities dealer. Greater transparency would also have other benefits. If regulators had ready access to current OTC derivatives transaction information in trade repositories, I suspect that this would serve as a brake on the use of OTC derivatives that are used for more questionable purposes. For example, this includes trades undertaken to evade accounting rules or to circumvent investment charter limitations.

Christian Noyer: After the global crisis, which models of growth? Keynote speech by Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, at the CIGS (The Canon Institute for Global Studies) – EHESS (Ecoles des Hautes Etudes en Sciences Sociales) International Symposium “After the global crisis, which models of growth?”, Tokyo, 3 October 2011. *  *  *  Let me begin by saying I am delighted to be here with you today. I am of course conscious that the world is experiencing major economic turbulence and that Japan has suffered this year a series of particularly cruel catastrophes. As you know, I have profound admiration for your country, and we French wish to show our solidarity with you in the face of these ordeals. I would like to warmly thank the organisers of this symposium – which should be fascinating – for giving me this opportunity to speak to you. I thank the Canon Institute for Global Studies and its Chairman, my friend Governor Fukui. I also thank the France-Japan Foundation of the EHESS and its Director, Sebastien Lechevalier. In 2009, the Banque de France was one of the first institutional sponsors of this Foundation, whose objective of promoting greater intellectual and cultural exchange between Japan and France is highly commendable. Our two countries have much to learn from each other and a great deal to gain from deeper collaboration. I do therefore strongly welcome this initiative.