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The London Stock Exchange and Euronext now have CCPs of their own.
As Ben Bernanke, the Fed's chairman, has noted, CCPs' margin and collateral will never be enough to protect them from a financial earthquake.
America's Treasury called in May for all "standardised" OTC derivatives to be cleared through CCPs.
Banks and custodians will battle it out to provide a variety of collateral-related services in future, with third-party vendors and even CCPs themselves also vying for business.At a price, some firms may be able to wash their hands of the requirement to hold a portfolio of eligible assets altogether.
CCPs are supposed to have enough money in hand to withstand the default of one member under "extreme but plausible" conditions whatever that means.
All this should be sorted out before the game goes much further.Another looming problem is the quality of collateral that CCPs take.
Similar(28)
NYSE Euronext's merger with Deutsche Börse would have plugged it into Eurex Clearing, the German exchange's CCP.
"Why double their number?"CCP clearing may also impose greater demands on cash for businesses that currently use OTC derivatives.
It acts as the central counterparty (CCP) for all shares traded on both the NYSE and the Nasdaq, and registers changes of ownership.
The most urgent requirement is to have a Europe-wide CCP.
Moreover, today's shrinking information-technology budgets will not stretch to developing pan-European compatibility.Real savings, on the other hand, are being achieved by exchanges offering access to a central counterparty (CCP).
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com