Regulators realize clearinghouses also pose risk

01/14/2010 | Financial Times (tiered subscription model)

Regulators and central bankers have been encouraging over-the-counter derivatives dealers to route trades through central clearinghouses as a way to reduce risk. However, clearinghouses also pose a risk because they must be strong enough to survive defaults by any of their members. "If a [central clearing counterparty] is successful in clearing a large quantity of derivatives trades, the CCP is itself a systemically important financial institution. The failure of a CCP could suddenly expose many major market participants to losses," the Federal Reserve Bank of New York wrote in a policy paper.

View Full Article in:

Financial Times (tiered subscription model)

Published in Brief: