Firms see fund managers and hedge funds warming to clearing to tap the risk benefits rather than to comply with regulation
By Dan Barnes
Central clearing has heralded a positive
change in the market for buy-side firms, although advances may
have been possible independently.
Despite its cost, institutional investors
see the central clearing model, regulators’
framework of choice to reduce counterparty risk, as largely
beneficial. A report by Greenwich Associates, 'Systemic Risk
and the Impacts of Central Clearing’ published in
April 2015 makes the case that using a central counterparty
(CCP) to buffer over-the-counter (OTC) derivatives traders
against a counterparty default has been net positive for the
Of the 72 respondents in the Greenwich
study, 61% thought the costs were outweighed by the benefits it
brings to the market and 52% thought the costs were outweighed
by the benefits it brought to their firms.
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