The Theoretical Effects of the Introduction of a Central Counterparty for the Organization of OTC Markets

Valère Fourel Économiste, Direction des études monétaires et financières, Banque de France.
Julien Idier Économiste, Direction des études monétaires et financières, Banque de France.


This article identifies and analyzes the various benefits and drawbacks that the adoption of a central counterparty [CCP] for OTC markets can induce, notably in terms of counterparty, systemic, transparency and liquidity risks management. First, we look at how the transaction costs are affected by the introduction of this risk pooling entity. The implications of the presence of a CCP on the liquidity and market transparency are then analyzed. Finally, we discuss the various risks faced by the CCP (concentration risk, information asymmetry, moral hazard and adverse selection) and bring out some recommendations regarding the functioning and access to the CCP terms.


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Footnotes

L’opinion exprimée dans cet article reflète celle des auteurs et ne peut en aucun cas être attribuée à celle de la Banque de France.Les auteurs remercient pour leurs remarques : Laurent Clerc, Nicolas Gautier, Caroline Jardet, Stéphane Kunesch, Jean-Stéphane Mésonnier, Margherita Redaelli, Fabien Renault et Anne-Marie Rieu.

1   Voir : Acharya et al. (2009), pour le cas des dérivés de crédit.


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