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Swaptions clearing raises CCP risk fears 

April 24, 2015

Helen Bartholomew, IFR

Clearing houses may be increasing risk for their members by adding products that some market participants believe are best suited to the bilateral environment.

Speaking on a central counterparty clearing panel at ISDA’s AGM in Montreal, Emily Portney, global head of clearing and collateral management at JP Morgan Securities, warned that the introduction of swaptions into the cleared environment may be putting clearing brokers at greater risk.

“We feel there’s more work to be done on default management of the product before it becomes eligible for clearing,” she told delegates at the event.

CME is poised to begin clearing swaptions, pending regulatory approval, leapfrogging LCH.Clearnet’s Swapclear, which has been tussling with the product for a number of years, but has now put plans on the back burner.

For CCP’s that are vying for a slice of the growing market for over-the-counter derivatives clearing, swaptions have been viewed as a key battleground as global regulators attempt to push as much of the OTC derivatives market as possible through central clearing in order to reduce systemic risk.

Read more: IFR

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