##marks used in the eu. in switzerland, too, a need for regulatory action is likely to emerge in this area. at the national level, the snb and finma are talking to financial market participants about ensuring a more robust construction of the interest rate benchmarks which are fixed in switzerland. the aim is to widen the data pool and improve the calculation methods, and the focus is on reference interest rates for very short - term swiss franc transactions, specifically one - day terms. these transactions form the basis for the swiss franc yield curve. the two benchmarks involved are, first, the tois fixing, which is used for interest rate derivatives in the swiss franc money market, and second, saron, which serves as the basis for the yield curve on the swiss franc repo market. progress has already been achieved on both interest rate benchmarks. although the level of activity on the money market remains persistently low, they continue to be available to the market as a basis for interest rate transactions in swiss francs. however, the libor retains its position as the most important interest rate benchmark in the money and capital markets. bis central bankers ’ speeches

the president's working group on financial markets, 1999, page 17. let us again have a look at the ltcm case in order to assess the disruptive capacity of hlis through this second transmission channel. the president's working group on financial markets concluded, « nor were ltcm's exchange positions of such magnitude that a default by it would have caused significant disruptions of the u. s. exchange - traded futures market. » 8 for over - the - counter ( otc ) traded products there are no reliable numbers. it is, however, known that the majority of otc contracts were collateralised. 9 an upper bound for the non - collateralised positions is the abovementioned loss of usd 5 billion, which is presumably too small a number to create a severe crisis in other otc segments. moreover, we should not forget that hundreds of hedge funds are liquidated every year without any negative impact. also, the collapse of a large hedge fund, amaranth, in autumn 2006 had only a small impact on the financial markets. to summarise, hlis themselves cannot be seen as direct risk to financial stability, at least not at their present stage of development. however, there are two potential transmission channels through which shocks on hlis could spread to large international banks. if these shocks are large and banks are not robust enough, then the stability of the financial system could be at risk. however, available data and experience with failures of larger hlis in the past suggest that the disruptive capacity of hlis is rather limited. 4. should hlis be regulated? as we discussed earlier, the hli industry itself does not appear to be a threat to financial stability. however, the failure of one or more large hlis could – primarily via credit exposures – weaken a systemically important bank which, in turn, could weaken the financial system. this potential chain reaction, however, does not in itself prove the need for regulation. this challenge can be met by other initiatives. first of all, there is market discipline. market discipline can compensate for a lack of regulation. i assume market discipline to be more effective in the case of hlis than in the case of banks for three reasons : ( a ) investors in hlis are generally well informed and relatively “ sophisticated ”, ( b ) the number of investors is small and ( c ) hlis do not constitute an industry regarded as worth being rescued in terms of the public interest. however,