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Central clearing and CDS market quality

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  • Paulo Pereira da Silva
  • Carlos Vieira
  • Isabel Vieira

Abstract

This paper contributes to the literature on the impact of central clearing on financial market quality. Focusing on the CDS market, a difference‐in‐differences analysis is performed to identify effects of voluntary central clearing of contracts on ICECC and ICECE. Patterns of market quality proxies are compared before and after central clearing initiation. We conclude that central clearing improves liquidity, price informativeness and precision, and also the integration of the CDS and stock markets. Results are inconclusive for the impact on CDS price volatility.

Suggested Citation

  • Paulo Pereira da Silva & Carlos Vieira & Isabel Vieira, 2018. "Central clearing and CDS market quality," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(6), pages 731-753, June.
    • Handle: RePEc:wly:jfutmk:v:38:y:2018:i:6:p:731-753
    DOI: 10.1002/fut.21906
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    4. Marra, Miriam & Yu, Fan & Zhu, Lu, 2019. "The impact of trade reporting and central clearing on CDS price informativeness," Journal of Financial Stability, Elsevier, vol. 43(C), pages 130-145.
    5. Injun Hwang & Baeho Kim, 2020. "Heterogeneity and netting efficiency under central clearing: A stochastic network analysis," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(2), pages 192-208, February.

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