Risk: Does moving to a central clearing house address the industry's concerns?
Helen Bramley: In light of recent events, it may be viewed that a central clearing house would have provided information on the net exposure of the major dealers and could have ensured the posting of additional collateral as the market conditions moved. Clearing houses also generally allow netting, increasing efficiency of capital and therefore reducing liquidity pressure. To some extent, moving to a central clearing house would lessen the burden on credit departments as it would monitor its participants' credit rating and provide the benefit of removing counterparty risk. However, this move has the potential to reduce the risks to its participants and creates a concentration of risk management responsibilities, which could itself disrupt the market. It is therefore vital that there is clear regulation, control and transparency and standardisation of contract terms for all participants.
More on Technology
Result comes despite tougher rules on market manipulation and abuse
Focus needs to be on reacting, not stopping every threat
Companies can wring more value from regulation-mandated data
Risk's annual round-up of new software developments
Sign up for Risk.net email alerts
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
Nominated for two technology awards
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.