More guidance needed from regulators on clearing

Regulators are pushing for standardised derivatives to be cleared through central counterparties, but further rules are needed to ensure an appropriate balance between initial margin, the default fund, and the contributions of clearing houses, argues Christopher Perkins

The mandatory central clearing of standardised over-the-counter derivatives, as required by the Dodd-Frank Act, will result in enhanced transparency and mitigation of systemic risk – if properly implemented. To achieve these goals, global regulators must introduce standards for derivatives clearing organisations (DCOs) to ensure an appropriate relationship is in place between initial margin, the default fund and DCO contributions to the risk waterfall.

To achieve balance in these elements