Wider clearing scope will create risk, warns Goldman exec

Industry would struggle to hedge risk following a dealer default, says Goldman's Frankel

sea of dollar bills disappearing into a vortex

Regulators will create systemic risk if they expand the range of over-the-counter derivatives that is required to centrally clear, according to Oliver Frankel, managing director for derivatives risk at Goldman Sachs. The smaller pool of dealers that trade less-liquid products may not be able to absorb the risk resulting from the default of a rival, he argued at yesterday's Quant Congress Europe conference in London. "Clearing products beyond which the market can provide hedging liquidity for