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Threats may be an effective way for central counterparties (CCPs) to get their members to bid on defaulted portfolios but they could backfire in a crisis, new research claims. Instead of penalties for non-participation, the research argues for an overhaul of the mechanics of default auctions, with one eye on making the price easier to digest for the winner, and another on limiting the pain for the losers.

The CCP Global PQD Newsflash provides an overview of the risk management provided by CCPs across the globe and complements public statistics such as the BIS derivatives statistics. This PQD Newsflash offers an overview of the key statistics, scale and nature of financial market infrastructure risk management from a global perspective and allows market participants to gain a clearer view of the CCP ecosystem. The data is aggregated directly from the CCPs themselves according to the CCP Global standardized template, carrying information stipulated in global regulatory guidance. Further details for individual CCPs can be found in links provided on the CCP Global website.

The Financial Stability Board (FSB) published a consultation report on the financial resources and tools for central counterparty (CCP) resolution. It presents the outcome of the FSB's qualitative analysis of a set of financial resources and tools for resolution: (i) bail-in bonds; (ii) resolution funds; (iii) resolution-specific insurance; (iv) resolution-specific third-party contractual support; (v) resolution cash calls; (vi) statutory or contractual variation margin gains haircutting for resolution; and (vii) equity in a first-loss position. The resources and tools were assessed against the relevant considerations for financial resources set out in the FSB Key Attributes of Effective Resolution Regimes for Financial Institutions and accompanying guidance on CCP resolution.

"China's Futures and Derivatives Law (FDL), which takes effect today, marks a historic moment for the country's over-the-counter derivatives market. By enshrining the enforceability of close-out netting in law, the FDL removes a significant barrier to the development of a well-functioning derivatives market, paving the way to greater domestic and international participation and more effective risk management."

"I study an entrepreneur's incentives to build a decentralized platform using a blockchain. The entrepreneur can either build the platform using a regular company and retain control of the platform, or build the platform using a blockchain and surrender control of the platform. In either case, the platform's users experience a locked-in effect. I show that a decentralized implementation of the platform is both (i) more profitable for the entrepreneur and (ii) a Pareto improvement, if and only if the size of the locked-in effect exceeds some threshold. Further, progressive decentralization through airdrops can be optimal."