Study contradicts a BIS report that said capital costs favour central clearing
The cost of clearing over-the-counter
derivatives is forcing firms to quit the cleared markets and
conduct more business in the riskier bilateral market,
according to a new report that calls into question one of the
tenets of the G20 clearing reform agenda.
Researchers from the US Office of
Financial Research, Samim Ghamami and Paul Glasserman,
concluded in a report the cost of clearing certain OTC
products, when compared to the cost of uncleared products, is
acting as a disincentive for firms to use cleared
"In the absence of a cost advantage for
central clearing, market participants may be motivated to
customise contracts in order to trade them bilaterally. Without
a cost advantage, banks may also be less inclined to move
legacy trades to central counterparties (CCPs)."
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