The product no-one wants to sell: portability held up by lack of rules
Users of client clearing services want to know their cleared trades have a home if the original provider collapses. Quietly, some dealers are offering guarantees, but they fear the regulatory treatment these contingent funding liabilities might receive
It's the product every client wants to buy and no dealer wants to offer: a guarantee to accept a cleared portfolio in the event of another clearing provider collapsing. Without this portability guarantee, derivatives users that access a central counterparty (CCP) indirectly, through its inner circle of clearing members, could have their positions liquidated if one of the member firms implodes – and smaller banks that use indirect clearing won’t be able to apply the rock-bottom 2% risk-weight to
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