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Options trading error heightens clearing fears 

March 3, 2014
Helen Bartholomew, IFR

Central clearing concerns have been reignited after an erroneous options trade pushed South Korea’s HanMag Securities to the brink of bankruptcy and set in motion the Korea Exchange’s default waterfall, mutualising W46bn (US$43m) of losses among clearing member firms.

The latest clearing debacle is a stark reminder of the potentially risky path regulators have set upon as they mandate large chunks of the US$693trn over-the-counter derivatives market for central clearing.

December’s costly mistake could force regulators to take a closer look at central counterparty capitalisation requirements in an effort to meet key regulatory goals of avoiding taxpayer bailouts and minimising the systemic impact of default situations.

Read more: IFR

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