Client clearing poses acute liquidity risks

Margin jump risk


Energy can neither be created nor destroyed: it can only be transformed from one state to another. A similar principle can be applied to risk. Regulators are putting the finishing touches on rules requiring a large portion of the over-the-counter derivatives market to clear through central counterparties (CCPs), a move they believe will reduce bilateral counterparty credit risk and make the financial system safer. For this structure to work, however, clearing houses must receive vast amounts of