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Extraterritoriality and volumes make future uncertain for CCPs 

March 24, 2014
Elliott Holley, Banking Technology

The number of central clearing counterparties is likely to rise in the near future as new entrants put Latin America, Africa and Australia on the map for OTC derivatives clearing, but with more regulatory intervention expected and unpredictable customer flows, the new venues face an uncertain future according to a new report by analyst firm Aite.

The global push to centrally clear OTC derivatives is an ongoing saga that has led to regulatory change on both sides of the Atlantic and into Asia. The core concept is to improve transparency and lessen counterparty risk by moving to a CCP-clearing model. Under that model, each party in the transaction enters into a contract with the CCP and avoids taking on the risk of the other defaulting.

lthough the original plan was to have OTC derivatives cleared through CCPs by the end of 2012 at the latest, Aite says it has taken many months of drafting, consultation and amendment as well as public debate to bring the new rules to bear in the US and Europe.

Read more: Banking Technology

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