Futures Friendly Derivatives : A Fix for the OTC Derivatives Mess, Replacing the Government’s $ 1 Trillion Subsidy of Large Bank Dealing

This note presents an easily implemented, inexpensive, private sector innovation, a futures-friendly derivative (FFD) intended to compete with the unnecessarily credit-risky, dealer-traded, over-the-counter (OTC) derivatives, and their clumsy, expensive, government-mandated clearing counter-parties (OTC CCPs.) The FFD may be traded and cleared as though it were a futures contract. Perhaps, if successful, it will ultimately end OTC CCP's systemically important classification, reducing our more than $1 trillion estimate of the implicit government debt created by OTC CCPs.Following the Introduction's brief description of the proposed instruments and their purpose, section two explains the source of the OTC derivative markets' inefficiency. Section three accounts for some of the damage done. Section four describes the new instruments. The final section concludes the note