Risk Management of Central Clearing Counterparties

Dear Colleagues,

After the global financial crisis, the importance of central clearing counterparties (CCPs) specialized in mitigating the counterparty credit risk of market transactions has grown significantly. The mission of these financial institutions is not only reducing partner risk at a cost-efficient way, but also compressing OTC markets and increasing transparency. In line with the ever-growing regulatory requirements, market developments, and technological advances, CCPs are continuously improving their risk management techniques based on a multilevel “waterfall” guarantee system.

With more centrally cleared transactions, however, CCPs might become a source of procyclicality and systemic risk. In turbulent times, increasing margin calls trigger fire-sales which contribute to adverse price movements, further increasing volatility, which might in turn necessitate higher margins again. At a large scale, this vicious circle might be detrimental to the financial system.

In this Special Issue, we invite high-quality research papers discussing new ideas related (but not limited) to the following questions:

• How are CCPs operating in the global world?
• What are the main tendencies and challenges CCPs are facing?
• How can CCPs comply with regulatory requirements?
• How can CCPs balance between contradictory objectives such as prudent operation and competitiveness?
• How do CCPs contribute to netting trading positions and compressing markets?
• How can the operation of CCPs be improved (more frequent settlements, merger or division of guarantee funds, improvement of trading platform and market infrastructure, etc.)
• How should CCPs be regulated to avoid procyclicality?
• How should special (gas, electricity, derivative, etc.) markets be regulated?
• How can “too-big-to-fail” CCPs be recovered in the case of a default?
• What are the unintended consequences of the present regulatory framework?
• How are technological innovations such as blockchain, smart contracts, and other decentralized clearing mechanisms expected to complement or replace central clearing?

Prof. Dr. Edina Berlinger
Dr. Kata Váradi
Dr. Barbara Dömötör
Guest Editors

Manuscript Submission Information

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• clearing and settlement
• guarantee system
• margin requirements
• procyclicality
• systemic risk