A key driver for central counterparty (CCP) interoperability is greater competition in clearing, to bring down costs for customers. In what is an already aggressive European market, all interoperable CCPs have announced fee reductions.
However, customers should not select a CCP solely based on cost. With additional financial instruments being transferred to clearing houses, CCPs are increasingly viewed as systemically important financial institutions (SIFIs). There has been much debate
over whether CCPs are ‘too big to fail’ and just what would happen if a CCP were to default. With this in mind, other factors should influence a trading firm’s choice of clearing partner.
In particular, the capital strength of a CCP, the sustainability of its business model and the sophistication of its risk model are factors that are becoming increasingly important to customers, against the backdrop of a highly volatile market. At the same
time, CCPs are having to differentiate themselves both in terms of market coverage and their range of services. Clients are looking for clearing houses that don’t limit themselves by servicing one financial market or one asset class. As a result, we can expect
to see the forward-thinking CCPs moving outside of their traditional remits over the coming months in order to survive in this evolving market.