The challenges of central clearing
US legislators have finalised their proposals to force derivatives users to clear a large proportion of their business through central counterparties. But the push to central clearing presents a number of technological challenges. By Clive Davidson
Central clearing is a key part of the campaign by regulators and politicians to reduce the systemic risk of the over-the-counter derivatives market. Combined with a push to improve transparency, enhance levels of standardisation and encourage greater use of collateral, regulators hope to bring OTC trades out of the shadows and reduce the risk posed by a major counterparty default.
Led by the Federal Reserve Bank of New York, supervisors have been meeting regularly with the major dealers, buy
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