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Interoperability between central counterparties

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  • Jürg Mägerle
  • Thomas Nellen

Abstract

In reaction to recent requests for interoperability between central counterparties of European stock markets, regulators have issued new guidelines to contain systemic risk. Our analysis confirms that the currently applied cross-CCP risk management model can be a source of contagion, particularly if applied in multilateral frameworks. While regulators' new guidelines eliminate systemic risk, this comes at the cost of an inefficiently overcollateralised clearing system. We discuss further approaches that contain systemic risk while reducing or eliminating overcollateralisation. Interoperability is of economic importance as it may contribute to the efficiency and safety of a worldwide fragmented clearing infrastructure.

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File URL: http://www.snb.ch/n/mmr/reference/working_paper_2011_12/source/working_paper_2011_12.n.pdf
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Bibliographic Info

Paper provided by Swiss National Bank in its series Working Papers with number 2011-12.

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Length: 37 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:snb:snbwpa:2011-12

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Keywords: interoperability between central counterparties; financial network; systemic risk; netting efficiency;

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Cited by:
  1. Nathanael Cox & Nicholas Garvin & Gerard Kelly, 2013. "Central Counterparty Links and Clearing System Exposures," RBA Research Discussion Papers, Reserve Bank of Australia rdp2013-12, Reserve Bank of Australia.
  2. Stacey Anderson & Jean-Philippe Dion & Héctor Pérez Saiz, 2013. "To Link or Not To Link? Netting and Exposures Between Central Counterparties," Working Papers, Bank of Canada 13-6, Bank of Canada.

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