China's biggest businesses raise capital through underwritten initial public offerings. But in the past few years, hundreds of mid-market entities have gotten U.S. listings through a back-door maneuver known as a "reverse takeover"—in which an active Chinese business merges into a dormant American shell corporation that was registered for public trading.
The lure for American investors is the wondrous growth of China's economy and the ascent of such benchmarks as the Halter USX CHINA Index, which rose more than 60% last year. But most reverse-merger stocks have proven to be a poor way to ride China's boom. Today, the market cap of these stocks has shrunk to $20 billion, a 60% drop.
The G20 has stated that all OTC derivative contracts should be reported to trade repositories, while all standardized contracts should be cleared through central counterparties and, where appropriate and practical, traded on an exchange or electronic trading platform.
AIMA states that hedge fund managers—heavy users of OTC derivatives—would have to bear significant costs associated with administrative and operational changes the reforms would require. However, the organization believes that in the long run, hedge funds would actually benefit.
