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Skin in the game at CCPs 

March 20, 2015

Features, COO Connect Peer Group Network

The announcement by Intercontinental Exchange (ICE) that it is to infuse a chunk of its own capital into some of its default funds across the world is welcome news as a growing percentage of the notional $700 trillion over-the-counter (OTC) derivatives market is pushed onto centralised clearing houses (CCPs) as mandated under the Dodd-Frank Act in the US and the European Market Infrastructure Regulation (EMIR). 

The initiative by ICE not only helps improve its risk mitigation procedures but also provides clearing members with potential cost savings, which will ultimately (hopefully) be passed down to end users such as institutional investors and fund managers. The risks associated with CCPs should not be underestimated. The volume of OTC transactions being cleared has skyrocketed over the last few years making them one of the most – if not the most – systemically important financial institutions (SIFIs) in the marketplace today. In other words, a CCP failure would be catastrophic for financial institutions worldwide given their global reach and significance.

Read More: COO Connect Peer Group Network

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