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In 2022, US financial regulators proposed to mandate a single central clearing mechanism for treasury bonds and repo transactions to stabilize financial markets. The systemic risks inherent in repo markets were first highlighted by the global financial crisis and, as a response, global financial authorities such as the Financial Stability Board (FSB) and Bank for International Settlements (BIS) have advocated for the introduction of a central counterparty (CCP). This study examines the structural characteristics of Korean repo markets and proposes the introduction of CCPs as a way to mitigate systemic risk. To this end, the author analyzes the structural differences between US and European repo markets and estimates the potential consequences of introducing CCP clearing in local repo markets. In general, CCPs offer two benefits: they can reduce required capital through netting in multilateral transactions, and they can mitigate the effects of risk transfer by isolating counterparty risk during periods of turbulence. In Korea, the latter effect is expected to play a pivotal role in mitigating potential risks.

The purpose of this paper is to answer a specific research question: How have EU and US regulators translated the idea of central clearing into law?

A meticulous legal research is carried out. First, the pre‐crisis regulatory regime for credit default swap (CDS) is reviewed, from a securities law angle as well as from a comparative Euro‐American perspective. Next, the regulatory processes leading to the adoption of the central clearing regulations are discussed. Thereafter, a material comparative analysis is made of the provisions related to central clearing in the EU and US regulatory initiatives. Finally, the paper is concluded with an evaluation of both legislations in the light of all previous analyses.

The research first shows that central clearing regulations rely on a series of presumptions, both concerning the gravity of counterparty risk threats and the necessity of central clearing. Additionally, the EU and US clearing regulations are similar with regard to the broad innovations they introduce, i.e. the mandatory central clearing of a variety of over‐the‐counter derivatives and counterparty risk management requirements for central clearing institutions and for non‐cleared swaps. However, the specific content of the provisions often differs. Furthermore, both legislations are limited to enouncing broad principles. This is also the case for the crucial provisions related to counterparty risk management. Therefore, these provisions in se do not guarantee the proper regulation of counterparty risk management practices. Consequently, much is to be expected from the implementing measures adopted by regulatory institutions.

The paper provides an overview of those provisions in the European and US regulations that specifically concern central clearing for CDS. It is one of the first papers which does this in a very well‐structured and clearly written manner. Also it is one of the first to provide a clear comparison between the provisions in the EU and the US regulations.

This paper aims to discuss the European Commission’s proposal for a central counterparty (CCP) recovery and resolution regulation. In this respect, the paper comments the consequences, risks and attention points for CCPs and their authorities.

This paper focuses on the proposed rules surrounding CCP recovery and resolution. The paper first familiarizes the reader with the risk management procedures currently obliged before discussing the resolution and recovery provisions foreseen in the proposal.

The proposed regulation commands significant requirements for CCPs and for their regulators. Not only will CCPs have to draft a recovery plan but also a resolution authority will need to be assigned. The latter will have the task, in consultation with a resolution college, to draft a resolution plan. When a resolution is inevitable, authorities will need to assure the continuation of the CCP’s critical functions, thereby warranting financial stability and investor protection.

To the best of the author’s knowledge, there are no other papers that provide a holistic overview of the newly proposed regulation and describe the choices to be made during a CCP’s resolution. This paper will be of interest to all CCPs and their stakeholders, such as their regulators, clearing members and their clients and other linked financial market infrastructures.

Central clearing counterparties’ (CCPs) specific loss allocation mechanism is reflected in the specific resolution regime designed at the international level. At the same time, international guidance texts require equity to bear losses first in resolution. This creates a tension that immediately exposes resolution authorities to potential claims from CCPs’ shareholders. The purpose of this paper is to seek possible options to solve that tension, thereby enabling a workable and credible resolution regime for CCPs.

The paper analyses the current tension between the no creditor worse-off (NCWO) counterfactual for CCPs and the “equity bears first losses in resolution” principle. It then considers six different options to solve this tension, ranging from a revision of insolvency law to the modification of the loss-allocation structure.

The paper concludes that additional layers of capital contribution, adapting the contractual arrangements or articles of incorporation and/or the creation of a specific NCWO counterfactual for shareholders could help in solving the identified tension.

The paper presents options on how to design a workable and credible resolution regime for CCPs that would enable resolution authorities to exercise their powers and have the flexibility to intervene at an early stage in recovery to prevent the exhaustion of available financial resources, without being unduly exposed to claims.

The paper contributes to the literature on CCP resolution. It is one of the first to analyse the articulation between the loss-allocation structure of CCPs, the NCWO principle and shareholders’ rights. We hope that this paper will encourage further literature to develop on this important subject.

The purpose of this paper is to investigate the possibility of monitoring stress on stock markets from the perspective of a central counterparty (CCP). Due to their balanced positions, CCPs are exposed to extreme price movements in both directions; thus, the major risk for them derives from extreme returns and market illiquidity. The authors examined the connection of the stress alarms of return- and liquidity-based measures to find an objective basis for stress measurement.

The authors defined two types of stress measures: indicators based on extreme returns and liquidity. It is suggested that the stress indicators should be based on the existing risk management methodology that examines different risk measure oversteps. The stress signals of the past nine years on the German stock market were analyzed. The authors investigated the connection between the chosen stress measures to obtain a robust measure for alarming stress.

Although extreme returns and illiquidity are both characteristics of stress, the correlation of returns- and liquidity-based stress indicators is low when taking daily values. On the other hand, the moving averages of the indicators correlate significantly in the case of measures of downward and upward extreme returns and liquidity measured by the relative spread. The results are robust enough to be used for monitoring stress periods.

This paper contributes to understanding the characteristics of stress periods and points to the fact that stress signals measured by different aspects can also differ within the same asset class. The moving averages of returns- and relative spread-based indicators, however, could provide a cost-effective quantitative support for the risk management of a CCP and make the margin calculation predictable for clearing members as well.

The purpose of this paper is to explain the European Market Infrastructure Regulation, known as EMIR, adopted on July 4, 2012 as the Regulation on OTC Derivatives, Central Counterparties and Trade Repositories.

The paper explains EMIR's clearing and reporting requirements, who is within the scope of those requirements, who is a financial and non‐financial counterparty, the clearing thresholds, the clearing and reporting obligations, when those obligations will begin, the risk mitigation obligations, and a range of potential questions anyone trading in OTC derivatives should consider.

EMIR requires that all standardized OTC derivatives contracts be cleared through a central counterparty and reported to a trade repository.

The paper provides practical guidance by experienced financial services lawyers.

This paper investigates the impact of moving Central Counterparty Clearing Houses (CCPs) that clear euro-denominated transactions to the Eurozone after the withdrawal of the UK from the European Union. Prior to Brexit, the City of London had a dominant position in euro-clearing, but in the aftermath of Brexit, clearing houses might decide to move to the EU27. This paper aims to investigate the impact of moving euro-clearing to the EU27.

This paper provides an economic, political and legal investigation based on desk research. It studies the relevant materials, as they relate to the functioning of Central Counterparty Clearing in the aftermath of Brexit, with specific attention to the potential shift of locations and oversight.

The development of a EU27 financial hub and the possibility to increase oversight over euro-denominated financial transactions, which were partly at the roots of the financial and Eurozone crisis, could strengthen the market shaping of European financial markets. However, localizing euro-denominated transactions in Europe could potentially give rise to efficiency losses and a higher risk for companies and investors. Furthermore, the European regulatory framework currently faces certain weaknesses, obstructing the regulatory potential of the EU.

As the Brexit negotiations are not yet finished, this paper does not intend to set out a definite outcome of the processes currently taking place.

Shifting locations and oversight of CCPs as a result of Brexit could lead to the establishment of a large financial centre within the EU-27. At the same time, it is to be expected that such a development will have a significant impact on the financial infrastructure of the City of London.

There exists an important trade-off with regard to shifting locations that need to be at the forefront of the discussions and the negotiations when dealing with Brexit. This seems to be neglected in a lot of the current policy debates. This paper takes stock of the ongoing debate and how it relates to the functioning of CCPs.

The purpose of this paper is to investigate the state of integration of securities market infrastructure in Europe.

Given the lack of quantitative and price‐based measures, this paper adopts a rather qualitative approach to evaluating the degree and evolution of integration in the securities market infrastructure within Europe. Future challenges, policy options for regulation and market design are discussed.

Despite its single currency, the euro area securities infrastructure remains highly fragmented due to cross‐border differences in tax regimes, procedures, laws, and vested interests. Cost savings and increased efficiency can be expected from further integration.

This is the only paper which provides a comprehensive and comparative analysis of the current level of integration of the securities infrastructure in the euro area and its implications for regulation and market policy.

The purpose of this paper is to underline the (hidden) risks posed after the crisis by the exemption of non-financial operators, especially sovereigns, from the regulatory reforms of over the counter (OTC) derivatives undertaken by G20 countries in the absence of accounting data on trading.

Recent financial regulatory improvements are reported to underline that the trading of OTC derivatives by sovereigns and local administrations does not take place under the new regulatory umbrella, because of the relative size of the institution, the lack of incentives to adhere to Centralized Counterparty Systems (CCPs) and most of all, the absence of proper accounting rules. Sovereigns and local administrations have the potential to undermine global financial stability.

The limited availability of accounting data on derivatives’ use by public administrations constitutes a barrier towards a full comprehension of risks involved. Sovereigns should be compelled to adhere to the CCPs and the collateralized system of trading; the short-term costs of adhering to CCPs are worth $20bn.

The new regulatory system failed to explicitly consider the trading of sovereigns and this can reduce the effectiveness of regulation itself and can have negative impact on financial stability; in fact, omitting sovereigns from these regulations represent a significant risk oversight because they are systemically important players, although with a special political power.

Despite progress made in improving the transparency and resilience of OTC derivative markets after the subprime crisis, sovereigns and public administrations are exempted from the new regulation, posing severe risks to financial stability.