Regulators edge closer to CCP resolution plan

Author: Lizzie Meager | Published: 24 Feb 2016
The EC is preparing rules 
for CCP insolvency

Clearing houses – or central clearing counterparties (CCPs) – could be the next too-big-to-fail institutions. Post-crisis regulation insisting that over-the-counter (OTC) derivatives trades must be cleared through them has pushed an extra $100 trillion into the system in interest rate swaps alone, drastically increasing the systemic risk posed if one were to fail.

The European Commission is preparing new rules on the matter due in September, and the G20 is also investigating. It decided to explore the issue in 2010, yet is still struggling over what should happen – let alone who should pay for it. Everyone on every side has their own view: not them.

Failures are rare but they can, and have happened – the Hong Kong Futures Exchange failed during the global stock market crash of 1987 and the effects were catastrophic. Significant losses were suffered, the exchange was shut down...