Counterparty maze

Regulators in the US and Europe are evaluating the concept of a central trade repository for over-the-counter derivatives as a means of increasing transparency and allowing better detection of systemic weaknesses. But will they be able to overcome the hurdles needed to make it an effective tool? Joel Clark reports

Ten months on from the bankruptcy of Lehman Brothers in September 2008, regulators and governments are still scratching their heads to work out how large systemic risks in the financial system were allowed to go undetected. They are also starting to realise the collapse of a major financial institution doesn't just affect that firm's trading counterparties, but creates ripple effects that spread much further. Through winding networks of derivatives trades, the failure of a large institution in