Clearing the way ahead
The major credit derivatives dealers, along with the Clearing Corporation, are working to develop a central clearing house for over-the-counter credit derivatives trades. How will this initiative work, and are there are any rival schemes in the pipeline? By Duncan Wood
Early in 2007, a handful of credit derivatives dealers - Deutsche Bank, Goldman Sachs, JP Morgan, Lehman Brothers and Morgan Stanley - began to talk about how they could make the market more efficient. They were particularly worried about counterparty risk. Exposure to companies and credit derivatives indexes was being passed around the market, from one dealer to the next, creating long chains of transactions and an opaque web of interdependencies. If the dealers could eliminate some of this
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