The Research On Disclosure Mechanism Of The OTC Transaction

Derivatives are born with its particularity in the financial market. On the one hand, the trend that total of derivatives grows unstoppably, among which OTC derivatives transactions play the leading role, shows the impact of derivatives on the financial market cannot be replaced. On the other hand, OTC derivatives come along with economic, legal and even ethnical risks, as well as a quantity of disputes, which strengthens the importance of derivatives in the institutional level.Among different types of the OTC derivatives-related legal issues, the immature information disclosure mechanism is undoubtedly one the most prominent aspects. On the one side, unlike the regular financial products, the OTC transactions have special objects, content, methods, and the ultimate target of protection. On the other side, OTC transactions differ from the transactions in trading floor, on the aspects of the content and target of disclosure, as well as the strength of financial supervision.This paper can be divided into four sections. The first section discusses the necessity of the research on the disclosure of OTC derivatives transactions. This section firstly analyzed the status quo of OTC transactions, especially the urgency of risk control. On the basis of the above, it is further discussed on the legal characteristics of OTC transactions and the relevant requirements on disclosure, and analyzed the differences between regular financial products and OTC products, as well as between transaction on exchange and over the counter. The purpose of this section is to discover the special value of the research.The second section discusses the content of the OTC transaction disclosure. The section can be divided into two parts:the content of disclosure during the formation of the contract, which is on the basis of the analysis of ISDA Master Agreement, and the constant disclosure requirement during the performance of the contract, which is on the basis of the relevant international rules.The third section discusses the key obligations of the OTC transactions disclosure. By the analysis of the major legal theories and classical cases, the key obligations can be deduced to the obligation of risk disclosure and the obligation of advice. Besides, after defining the basic obligations, the section further concludes the specific types of the responsibilities.The fourth section discusses the mechanisms for measuring the responsibilities of OTC disclosure. In accordance with the study of legislations and typical cases, it is further discussed two of the main forms of measuring, the investor suitability standard and the fiduciary standard.