ABSTRACT
This chapter is a study of the development of a particular sector of the Chinese financial industries, namely markets for over-the-counter (OTC) derivatives, focusing especially on FX markets. OTC is a term used in juxtaposition to exchange traded. That is to say that OTC derivatives are generally tailor-made products that for the same reason are not traded (as standardised products) on market exchanges but instead transacted in interbank markets, through negotiations between parties, meaning either two banks or a bank and a client. There is hence no open exchange and no market maker involved in such transactions. Derivatives markets generally form arguably one of the most knowledge- and technology-intensive sectors in the financial industry as they rely heavily on pricing models and information and communication technology (ICT).
