According to Eurex Clearing’s latest white paper, central counterparties (CCP) reduce systemic risk in financial markets.
‘How central counterparties strengthen the safety and integrity of financial markets’, published on 8 July, supports the regulatory agenda to broaden the use of CCP clearing together with regulatory requirements to make financial markets more robust and transparent.
The paper suggests that central clearing reduces risks in bilaterally negotiated products, such as over the counter derivatives, and allows them to mitigate systemic risks in these markets.
An analysis within the paper of past disruptions of CCPs against regulatory requirements shows that the European Market Infrastructure Regulation already sets high standards and can serve as a global regulatory benchmark.
Thomas Book, CEO of Eurex Clearing, says: “The White Paper shows the macro-prudential advantage of a centrally cleared market versus a bilateral one.”
“CCPs demonstrated their resilience and benefits during the recent crisis. As the new regulatory regime takes shape the positive features of cleared markets will be further strengthened. Of great importance are the recovery and resolution frameworks which ensure that systemic events can be managed appropriately.”
