CME Group Releases White Paper on CCP Issues (with Lofchie Comment)

CME Group published a white paper, titled "Clearing – Balancing CCP and Member Contributions with Exposures," that details its position on a variety of issues facing central counterparty clearinghouses ("CCPs").

Specifically, the paper considers the question of how much "skin in the game" CCPs should contribute to a market's financial safeguards. In the opinion of CME Group, the "skin in the game requirements" must be developed according to principles that incentivize market participants to manage the risks they create.

Lofchie Comment: The recent healthy debate over the safety (or not) of central clearinghouses is a wonderful antidote to the fiction championed by those who argue that central clearing eliminates risk. Credit goes to JP Morgan for initiating the discussion.

Related news: JPMorgan Issues Paper on Resolution Plan for Central Clearing Parties (with Lofchie Comment) (October 3, 2014).