The Failure of a Clearinghouse: Empirical Evidence

68 Pages Posted: 30 Aug 2017

Multiple version iconThere are 3 versions of this paper

Date Written: August 2017


We provide the first detailed empirical analysis of the failure of a derivatives clearinghouse: the Caisse de Liquidation, which defaulted in Paris in 1974. Using archival data, we find three main causes of the failure: (i) a weak pool of investors, (ii) the inability to contain the growth of a large member position, and (iii) risk-shifting decisions by the clearinghouse. Risk-shifting incentives aligned the clearinghouse’s interests with those of the defaulting member, induced delays in the liquidation of the defaulted position, and led private renegotiation attempts to fail. Our results have implications for the design of clearing institutions.

Keywords: Derivatives, central clearing, central counterparties

JEL Classification: G23, G28, N24

Suggested Citation

Bignon, Vincent and Vuillemey, Guillaume, The Failure of a Clearinghouse: Empirical Evidence (August 2017). Banque de France Working Paper No. 638, Available at SSRN: or

Vincent Bignon (Contact Author)

Banque de France ( email )

DGEI 49-1430
31 rue Croix des Petits Champs
Paris, 75001
+33142924330 (Phone)

Guillaume Vuillemey

HEC Paris ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351

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