Moral hazards for CCPs

Derivatives practitioners fear the political push for central clearing of standardised contracts could create a moral hazard, as clearing platforms might compromise their risk management standards to create a more competitive service. How are regulators responding? By Joel Clark

For a seemingly simple risk reduction tool, central clearing of over-the-counter derivatives contracts has been riddled with complications - from the intricate changes made to credit default swap (CDS) trading conventions earlier this year, to the arduous process of authorising central counterparties (CCPs) for clearing.

As European and US politicians edge closer towards new legislation for the derivatives industry, the increasing use of central clearing will continue to be a challenge for