CCP

WHAT IS THIS? A central counterparty (CCP) manages default risk by collecting initial and variation margin from both parties to a trade. Spill-over losses are absorbed via a default fund to which all members contribute – introducing a degree of mutualised risk – and by the CCP’s own capital. The concept is an old one that was extended to over-the-counter derivatives in the aftermath of the financial crisis.

Clearing away after Brexit?

This paper analyzes, from a legal perspective, the new framework, the roles and responsibilities of the European Central Bank, ESMA and the European Commission, and the possible outcomes for UK CCPs once Brexit is complete.

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