Push, ping or hub: industry tackles risk of clearing fails
An industry working group is about to publish principles on how to ensure swaps that are subject to a clearing mandate can be guaranteed to clear. But that masks sharp divisions within the industry over which entity should control the process. By Peter Madigan
When a company executes an over-the-counter derivative subject to a clearing mandate, it will face a brand-new risk – that the trade will not complete the journey to a clearing house. If that happens, the transaction would be illegal and, unless a remedy could be found, it would need to be terminated just minutes or hours after it had been executed – which could be costly in fast-moving markets, especially if the trade had already been hedged with another, offsetting transaction.
What the market
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