The Concentration of Cleared Derivatives: Can Access to Direct Ccp Clearing for End-Users Address the Challenge?

40 Pages Posted: 27 Nov 2019 Last revised: 29 Apr 2020

See all articles by Nahiomy Alvarez

Nahiomy Alvarez

Federal Reserve Bank of Chicago

John McPartland

Federal Reserve Bank of Chicago

Date Written: August, 2019

Abstract

Cleared derivatives contracts are now concentrated among a small and dwindling number of institutions. Many policymakers and regulators have argued that this concentration has adverse consequences, some of which may have systemic risk implications. The authors explore the benefits and challenges of encouraging major end-users of derivatives to become direct clearing members of central counterparties (CCPs). If done prudently, increasing and diversifying the pool of clearing members and redistributing outstanding derivatives contracts across them may help CCPs become more resilient.

Keywords: Central counterparties (CCPs), clearinghouse, derivatives, financial markets

JEL Classification: G01, G18, G21, G23

Suggested Citation

Alvarez, Nahiomy and McPartland, John, The Concentration of Cleared Derivatives: Can Access to Direct Ccp Clearing for End-Users Address the Challenge? (August, 2019). FRB of Chicago Working Paper No. WP-2019-6, Available at SSRN: https://ssrn.com/abstract=3494153 or http://dx.doi.org/10.21033/wp-2019-06

Nahiomy Alvarez (Contact Author)

Federal Reserve Bank of Chicago ( email )

John McPartland

Federal Reserve Bank of Chicago ( email )

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