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Derivatives Clearing and Settlement: A Comparison of Central Counterparties and Alternative Structures

8 Pages Posted: 5 Dec 2006  

Robert R. Bliss

Wake Forest University - Schools of Business

Robert S. Steigerwald

Federal Reserve Bank of Chicago

Abstract

Most exchange-traded and some over-the-counter (OTC) derivatives are cleared and settled through clearinghouses that function as central counterparties (CCPs). Most OTC derivatives are settled bilaterally. This article discusses how these alternative mechanisms affect the functioning of derivatives markets and describes some of the advantages and disadvantages of each.

Keywords: central counterparty, CCP, clearing and settlement, risk management, Central Banks and Their Policies, Information and Market Efficiency, Event Studies, Government Policy and Regulation, Regulated Industries and Administrative Law, Transactional Relation

Suggested Citation

Bliss, Robert R. and Steigerwald, Robert S., Derivatives Clearing and Settlement: A Comparison of Central Counterparties and Alternative Structures. Economic Perspectives, Vol. 30, No. 4, Fourth Quarter 2006. Available at SSRN: https://ssrn.com/abstract=948769

Robert R. Bliss (Contact Author)

Wake Forest University - Schools of Business ( email )

P.O. Box 7659
Winston-Salem, NC 27109-7285
United States
336-758-5957 (Phone)
336-758-6133 (Fax)

Robert S. Steigerwald

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States
(312) 322-2414 (Phone)
(312) 322-5943 (Fax)

HOME PAGE: http://www.chicagofed.org/financial_markets_group/fmg_preview.cfm?autID=427

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