A case study on non-standardised collateral derivatives, traded over the counter (OTC), gives concrete evidence that central clearing is producing efficiencies and attracting market participants. At least if a recent report from the CCP industry’s global trade association CCP12 is to go by.

By presenting three case studies, on the trends in clearing activities for different subcategories of OTC derivatives, CCP12 seeks to paint a rich and positive picture of where the development is going.

The case study on collateral is provided as a backbone of the report, also detailing how the assets are handled differently at two CCPs. The other two categories examined are foreign exchange and interest rate derivatives.

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“The report examines in detail how market participants across the spectrum of the Central Counterparty (“CCP”) industry are managing in this constantly evolving market. We explore key drivers of change currently taking place, the evolution in the bilateral and cleared markets and how Uncleared Margin Rules (“UMR”) are affecting the industry,” CCP12 writes in its press release.

“An increased transition”

CCP12 chairman Xu Zhen is quoted in the release:

“The CCP12 report ‘Progress and Initiatives in OTC Derivatives’ shows in-depth how there has been an increased transition to central clearing. The report illustrates to us that compared to the bilateral markets, the efficiencies in the cleared ecosystem are consistently becoming an attractive factor for market participants,” he says.
The full 60-page report can be downloaded here.