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Clearing over-the-counter derivatives

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Abstract

Prior to the financial crisis of 2008, the over-the-counter derivatives market was not required to ?clear? transactions. This changed with the signing of the new financial reform legislation, the Dodd?Frank Act on July 21, 2010. Going forward, most OTC derivatives will be cleared through a particular set of institutional arrangements: a regulated clearinghouse. This article provides an overview of how clearing works, the potential benefits of central clearing for OTC derivatives, and the optimal clearing structure.

Suggested Citation

  • Ed Nosal, 2011. "Clearing over-the-counter derivatives," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 35(Q IV), pages 137-145.
    • Handle: RePEc:fip:fedhep:y:2011:i:qiv:p:137-145:n:v.35no.4
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    Cited by:

    1. Cyril Monnet & Thomas Nellen, 2021. "The Collateral Costs of Clearing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(5), pages 939-970, August.
    2. Rama Cont & Thomas Kokholm, 2013. "Central Clearing of OTC Derivatives: bilateral vs multilateral netting," Papers 1304.5065, arXiv.org.

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