The Cost of Clearing Fragmentation

• 成果类型: Article; Early Access
• 署名作者: Benos, Evangelos; Huang, Wenqian; Menkveld, Albert; Vasios, Michalis
• 署名单位: University of Nottingham; Bank for International Settlements (BIS); Vrije Universiteit Amsterdam
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.4867
• 发表日期: 2023
• 关键词: Central clearing; CCP basis; collateral; FRAGMENTATION

摘要

Fragmenting clearing across multiple central counterparties (CCPs) is costly because global dealers cannot net positions across CCPs. They have to collateralize both the short position in one CCP and an offsetting long position in another CCP. This, coupled with a structural net order imbalance across CCPs, can cause prices to persistently differ across them (the CCP basis). Tests based on unique CCP data for interest-rate derivatives (IRDs) yield broad empirical support for this intuition and suggest that the clearing friction costs sellers clearing in LCH, the largest European CCP for IRDs, $80 million daily.