Dealers warn of risks of forced allocation in OTC clearing

dealing cards

Major derivatives dealers are worried the default of a clearing member of a central counterparty (CCP) could result in large losses for the other members if the auction process fails.

Most CCPs would use an auction-like process to sell off a defaulting dealer's portfolio in an organised way, but dealers worry about what would happen if the auction failed to shift the entire portfolio. That scenario is a real possibility in over-the-counter markets, where a major default can often lead to the eva

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