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Who Pays? CCP Resource Provision in the Post-Pittsburgh World


  • Jorge Cruz Lopez
  • Mark Manning


At the Pittsburgh Summit in 2009, G20 countries announced their commitment to clear all standardized over-the-counter (OTC) derivatives through central counterparties (CCPs). Since then, CCPs have become increasingly important and there has been an extensive program of regulatory enhancements to both them and OTC derivatives markets. However, as OTC clearing has grown, tensions have emerged among market participants over CCPs’ traditional model of resource provision through loss mutualization. We argue that most of these tensions can be explained by a misalignment between the policy goal of enhancing financial stability and the delivery of that goal by mandating clearing through CCPs as they are currently organized. Specifically, the traditional model for resource provision makes most CCPs suitable for managing club goods, whereas financial stability is a public good. The key differences between these two types of goods, driven by the wedge between those who pay for them and those who derive the benefits, create the observed tensions. Thus, we propose a framework to analyze the functional elements of a CCP and examine whether an alternative clearing model might be more effective in supporting financial stability. We conclude that some tensions could perhaps be mitigated by unbundling the functions of a CCP and selecting the ownership and funding structure that best suits their individual characteristics. Functions that are critical for the provision of financial stability might imply some form of public sector involvement, whereas other services might lend themselves to a for-profit or traditional club model.

Suggested Citation

  • Jorge Cruz Lopez & Mark Manning, 2017. "Who Pays? CCP Resource Provision in the Post-Pittsburgh World," Discussion Papers 17-17, Bank of Canada.
  • Handle: RePEc:bca:bocadp:17-17

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    References listed on IDEAS

    1. Bignon, Vincent & Vuillemey, Guillaume, 2016. "The Failure of a Clearinghouse: Empirical Evidence," CEPR Discussion Papers 11630, C.E.P.R. Discussion Papers.
    2. Edwin Budding & David Murphy, 2014. "Design Choices in Central Clearing: Issues Facing Small Advanced Economies," Reserve Bank of New Zealand Analytical Notes series AN2014/08, Reserve Bank of New Zealand.
    3. Manmohan Singh, 2014. "Limiting Taxpayer "Puts" - An Example from Central Counterparties," IMF Working Papers 14/203, International Monetary Fund.
    4. Philipp Haene & Andy Sturm, 2009. "Optimal Central Counterparty Risk Management," Working Papers 2009-07, Swiss National Bank.
    5. Wenqian Huang, 2019. "Central counterparty capitalization and misaligned incentives," BIS Working Papers 767, Bank for International Settlements.
    6. James T. Moser, 1998. "Contracting innovations and the evolution of clearing and settlement methods at futures exchanges," Working Paper Series WP-98-26, Federal Reserve Bank of Chicago.
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    More about this item


    Financial markets; Financial stability; Financial system regulation and policies;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation


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