The Risk Controllers: Central Counterparty Clearing in Globalised Financial Markets

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That success transformed the business of clearing. Governments and regulators around the world gave CCPs and the clearing services they provide a front-line role in protecting the global economy from future excesses of finance. CCPs, which mitigate risk in financial markets, responded by greatly expanding their activities, notably in markets for over-the-counter derivatives, and often in fierce competition with one another. Because central counterparty clearing is a complex business with a long history that continues to influence decisions and structures even in today s fast changing world, The Risk Controllers explores the development of CCPs and clearing from the earliest times to the present.

It draws on the experiences of the people who helped to shape the business of clearing today. It sets the development of CCPs and clearing in the broader context of changes in society, politics and regulation. The book examines turning points, such as the stock market crash, that set clearing on a new path and the impact of long running trends, including the exponential growth of computer power and the ebb and flow of globalisation.

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It is essential reading for clearing professionals, legislators and regulators whose job it is to take this vitally important business into the future. The recent crisis has, thankfully, renewed interest in the importance of central counterparties: Peter Norman s book places the role of clearing houses in a historical context, and explains why the financial system s plumbing matters so much.

It should be read by anyone interested in building safer capital markets. Product details Format Hardback pages Dimensions People who viewed this also viewed. Central Counterparty Clearing Kevin Fernandez. Central Counterparties Jon Gregory. The Barefoot Investor Scott Pape. The Intelligent Investor Benjamin Graham.

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Flap copy "The recent crisis has, thankfully, renewed interest in theimportance of central counterparties: Peter Norman's book places the role ofclearing houses in a historical context, and explains why thefinancial system's plumbing matters so much. It should be read byanyone interested in building safer capital markets. This book claims a place as one ofthe essential primers for those seeking to understand the globalfinancial sector from the inside out. Although CCPs concentrate risk, actual experience -described in Chapter 3 on Lehman - indicates that those with wellorganised and prepared winding down procedures may considerablyreduce systemic risk.

Eddy Wymeersch, former chairman of CESR "Those who in the past may have viewed central counterpartyclearing as little more than a back-office 'utility' willlook at the subject very differently after reading The RiskControllers. These little known organizations fulfilled their emergency role of successfully completing trades that they had guaranteed. They also ensured that the world's securities and derivatives exchanges could continue to function and handle trading volumes that leapt into the stratosphere as prices for shares, bonds and other exchange traded instruments gyrated wildly in the crisis.

The Risk Controllers : Peter Norman :

Lehman's bankruptcy placed in jeopardy trillions of dollars worth of transactions conducted by and through the investment bank and its many subsidiaries. Assets were caught in limbo, spreading financial hardship, and in some cases collapse, to companies at the other end of these trades. As became clear when bankruptcy administrators on both sides of the Atlantic tried to make sense of the wreckage, some of these assets would be out of reach for creditors for months if not years.

But the story was very different for those trades transacted on derivatives and securities exchanges where central counterparty clearing houses guaranteed their completion and also for those transactions which, while negotiated bilaterally 'over-the-counter' OTC between buyer and seller, were centrally cleared by CCPs. Within a week, most outstanding open positions had been successfully hedged so that they could pose no threat of further losses to creditors or added chaos to the world financial system.

Within two weeks, most of Lehman's customer accounts were successfully transferred to other investment companies. By late October, it was apparent that CCPs in most leading financial markets had successfully managed the biggest default in financial history without cost to their member companies.

The Risk Controllers : Central Counterparty Clearing in Globalised Financial Markets

For those at the centre of the crisis, the performance of the CCPs permitted a rare outburst of satisfaction. Clearnet, claimed that the actions of the transnational European clearing group 'saved the City' in the weeks following the Lehman bankruptcy. On the other side of the Atlantic, Don Donahue, the Chairman and Chief Executive of the Depository Trust and Clearing Corporation of the US, reported that DTCC was 'able to ensure reliability and mitigate risk across the industry' despite 'unprecedented volatility and shaken confidence' in the financial services sector.

Thanks to CCPs, the world's securities exchanges have continued to raise risk capital for enterprises while futures and options exchanges continue to provide investors, traders and entrepreneurs with the means to protect themselves against risk. One consequence of the crisis has been to change fundamentally the status of CCPs in financial markets and the priority they are accorded on the agenda of policy makers.

Central counterparty clearing houses emerged from days of chaos among the very few organisations in the global financial system with a good story to tell. This book takes up the story of central counterparty clearing by examining in detail how CCPs functioned in the emergen. Campbell Biology by Peter V. Urry and Steven A.

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