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.

Fed approval leaves Ice/TCC on brink of CDS clearing

Intercontinental Exchange's (Ice) application to become a member of the Federal Reserve System has been approved by the US central bank, overcoming one of the final obstacles preventing the firm from launching its central clearing platform for credit…

Portal combat

The first central clearing houses for credit default swaps were expected to start business in December, but regulatory hold-ups delayed the launch in the US and are also causing issues in Europe. Although four ventures are planned, some dealers expect…

Breath of Liffe

Amid fierce competition and regulatory scrutiny, the combined initiative by derivatives exchange Liffe and clearing house LCH.Clearnet for clearing credit default swaps was launched on December 22. Will the two companies have a first-mover advantage? By…

Portal combat

The first central clearing houses for credit default swaps were expected to start business at the beginning of December, but hold-ups in regulatory approval delayed the launch in the US. With four ventures now due to take off within months of each other…

CDS clearing house to miss November 30 deadline

The November 30 target for central clearing of index credit default swap (CDS) trades set by a consortium of industry associations and investment banks is unlikely to be met, sources within the Federal Reserve Bank of New York have said.

Rocked by counterparty risk

The demise of Lehman Brothers has triggered fresh concerns about counterparty risk, creating a wave of novations and forcing dealers to think harder about the possibility of another major derivatives counterparty defaulting. Mark Pengelly reports

EC demands centralised clearing by year end

At a meeting with industry groups and regulators on October 22, the European Commissioner for internal markets and services, Charlie McCreevy, outlined his intentions to move credit derivatives away from the over-the-counter (OTC) market and under…

On thin ice

Following the near-collapse of Bear Stearns, even trades conducted with interbank dealers can no longer be considered risk-free. With so much of the derivatives market concentrated in the hands of a few dealers, what would happen if a major counterparty…

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