OPINION: Clearing makes rates markets safer, but not smarter

The push towards central clearing in US treasury markets later this year is presented as a story of increased transparency, less counterparty risk and tighter controls. After the painful lessons of the 2008 financial crisis, that is certainly a welcome evolution. However, there is a growing risk that the industry is mistaking structural reform for front office improvement. Clearing makes markets safer, but it does not necessarily make them smarter.