Rise in CCPs may spur collateral fragmentation

Currently only two Asian currencies figure on international clearing houses’ list of suitable collateral, but with another five CCPs set to be launched around the region the spectrum of instruments used will broaden. What will be acceptable and will this increase collateral fragmentation in Asia?

While the perils of a single currency have been crystal clear since the start of the European sovereign crisis, the advantages of a single pool of collateral to draw upon has been brought into focus with the move to centrally clear over-the-counter derivatives.

Asia’s numerous currencies and multiple jurisdictions looking to operate a clearing house could mean a fragmentation of collateral and greater costs for participants looking to clear in different places across the region with central