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Non-dealer Clearing of Over-the-counter Derivatives

Author

Listed:
  • Ashwin Clarke

    (Reserve Bank of Australia)

  • Paul Ryan

    (Reserve Bank of Australia)

Abstract

In 2009, the G20 leaders agreed that all standardised over-the-counter (OTC) derivatives should be cleared through central counterparties (CCPs). Accordingly, an increasing proportion of OTC derivatives are now centrally cleared, particularly where the trading counterparties are large ‘dealer’ firms. However, for many smaller financial institutions and non-financial corporations, there remain material challenges in adopting central clearing. Such firms usually access CCPs indirectly through arrangements with larger dealer firms – so-called ‘client clearing’ arrangements. While non-dealers have long used such arrangements for their exchange-traded activity, increased CCP clearing of OTC derivative products has prompted market participants and policymakers to examine more closely these arrangements. Aspects of the design of client clearing arrangements, such as collateral requirements, operating schedules, and the degree of segregation of positions and collateral, can all have material implications for the costs and risks a firm faces in its OTC derivative trading activity. Some of these aspects could also have broader implications for financial stability.

Suggested Citation

  • Ashwin Clarke & Paul Ryan, 2014. "Non-dealer Clearing of Over-the-counter Derivatives," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 77-88, March.
    • Handle: RePEc:rba:rbabul:mar2014-09
    as

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    File URL: https://www.rba.gov.au/publications/bulletin/2014/mar/pdf/bu-0314-9.pdf
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    References listed on IDEAS

    as
    1. Nicholas Garvin, 2012. "Central Counterparty Interoperability," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 59-68, June.
    2. Bank for International Settlements, 2011. "The macrofinancial implications of alternative configurations for access to central counterparties in OTC derivatives markets," CGFS Papers, Bank for International Settlements, number 46, december.
    3. Matt Gibson, 2013. "Recovery and Resolution of Central Counterparties," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 39-48, December.
    4. Rehlon, Amandeep & Nixon, Dan, 2013. "Central counterparties: what are they, why do they matter and how does the Bank supervise them?," Bank of England Quarterly Bulletin, Bank of England, vol. 53(2), pages 147-156.
    5. Lane, T. & Dion, J.-P. & Slive, J., 2013. "Access to central counterparties: why it matters and how it is changing," Financial Stability Review, Banque de France, issue 17, pages 169-177, April.
    Full references (including those not matched with items on IDEAS)

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