Trading OTC may be costlier than you think

Debate continues to rage about the merits of clearing, with some market observers arguing that the benefits of using central counterparties are outweighed by the precipitous costs involved. But such criticisms fail to take the full burden of over-the-counter business into account, argues Steffen Köhler

The current discussion surrounding the cost of clearing is not a new one. In the years following the 2008 financial crisis, many market commentators and academics have focused on the strengths and weaknesses of cleared versus non-cleared derivatives. Some studies have pointed to the very high potential cost of clearing over-the-counter derivatives, with authors citing figures in the billions or