Fed official slams ‘fantasy’ of CCP default management

McPartland: banks could not support multiple auctions if a big member firm defaults

chicago fed building
Federal Reserve Bank of Chicago

An official at the Federal Reserve Bank of Chicago has described as "fantasy" the idea that clearing house procedures for a default can work as the number of central counterparties (CCPs) in the over-the-counter market increases. The default management process relies on traders who are seconded from surviving bank members.

"Five years from now, someone besides me will realise the default management process for cleared OTC derivatives begins to fall down as the number of OTC CCPs derivatives

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