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The Role of Primary Dealers in Mitigating Liquidity Risk at U.S. Central Counterparties

Author

Listed:
  • Cindy E. Hull
  • Brett Solimine

Abstract

In this article, we examine the role of primary dealers as clearing members at U.S. central counterparties (CCPs) and their importance in liquidity risk management at those CCPs. We find that primary dealers are key contributors to concentration in central clearing—they make up a significant portion of clearing members and an even larger portion of activity cleared by U.S. CCPs. Second, we find that primary dealers are a major source of interconnectedness across U.S. CCPs. Further, we estimate that the bulk of clearing activity in the U.S. is conducted by the primary dealers that are also the most interconnected across CCPs.

Suggested Citation

  • Cindy E. Hull & Brett Solimine, 2025. "The Role of Primary Dealers in Mitigating Liquidity Risk at U.S. Central Counterparties," Chicago Fed Letter, Federal Reserve Bank of Chicago, vol. 510, pages 1-8, August.
    • Handle: RePEc:fip:fedhle:102242
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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other

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