Derivatives head for clearing

The establishment of central clearing houses for the credit default swaps (CDS) market promises to deliver significant benefits to hedge funds in the long run.

Central clearing and the eventual move to an exchange environment is expected to cut the cost of trading for hedge funds, while the management of counterparty risk at the clearing house may lead to a reduction in the amount of collateral that needs to be set aside with prime brokers to cover positions.

However, resistance from the major