Posts tagged 'central counterparties'

Central counterparties are too big to fail

Dressing up a pig as a princess, doesn’t make the pig a princess, and concentrating all the counterparty risk in the financial system into one place, doesn’t make it vanish. It’s still there. For the most part.

Given that you haven’t done anything with the risk other than shift it, the logical conclusion is that regulators have to be ready to either backstop or wind-down a central counterparty (CCP) in order to prevent some potentially rather cataclysmic disruption to markets. Read more

Clearing vs collateral

Encumbrance – along with collateral-shortage — is one of our favourite post-financial crisis terms.

A new paper from the Bank for International Settlement’s latest Quarterly Review deals with both in relation to central clearing, scheduled to cover all OTC derivatives by the end of next year. Read more

A glimpse at failed central counterparties

And dare we say, a glimpse into the future?

Regulators around the world seem set to install central counterparties (CCPs) as part of their efforts at post-financial crisis reform. But not without criticism — some commentators have likened their efforts to creating a series of AIG-type companies, or Too Big to Fail institutions, acting as insurers. Read more

European repo is back from the dead, says ICMA

The International Capital Market Association’s latest review of the European repo market is out, and there are some interesting findings to say the least.

Chief amongst them is the fact that European repo markets have recovered almost fully from their Lehman crisis setback, notching up a baseline market size of about €6,979bn — an increase of 25 per cent on the previous survey, conducted in December 2009. Read more