Publication

Information asymmetries are pervasive in the financial services industry, but the lack of transparency in commodity derivatives markets is particularly striking. Over 85% of commodity-derivative trading worldwide takes place over-the-counter (OTC) and information regarding both the fundamentals of commodity markets and the pricing mechanisms of commodity derivatives is patchy at best. Thus, in light of the entrance of institutional investors in commodity derivatives, public authorities must rely on scarce empirical evidence and consult closely with market participants to enforce and devise regulation.