Plumbing problems

Plumbing problems STOCK exchanges have not been lucky in love recently. 1 billion)—to secure a business that is almost bound to grow by regulatory fiat. This is being applied through bits of legislation worldwide, most importantly via the Dodd-Frank Act in America and the European Market Infrastructure Regulation (EMIR) in Europe, which was voted through the European Parliament on March 29th. Clearnet, a big clearing-house. The 2008 financial crisis proved their worth. Interbank markets seized up because no bank knew how big a risk the other was carrying, but the clearing-houses had a much better idea of their exposures and could quickly demand more cash or other collateral from counterparties. There is a risk that clearing-houses will begin exposing themselves to assets that aren't as good as cash. Clearers swear blind that they would never relax their standards. This is true, but it and several other CCPs are run for profit, and are bound to steer a course between risk and reward. Others are also crowding round. Now it will work on making NYSE Liffe Clearing, which clears the trades on London's Liffe futures exchange, a full CCP. On March 28th it announced plans for its continental derivatives-clearing activity to migrate there by early 2014, subject to regulatory approval (its continental cash equities will continue to be cleared by LCH. Clearnet). This will create new concentrations of risk. Since they are involved in cross-border business and meant to be "interoperable"—ie, allowing access to a wide number of counterparties—the responsibility for the bail-out of a CCP isn't a clear-cut geographical one. Regulators now want clearing-houses to act as central counterparties (CCPs) for as many derivatives transactions as possible. Any that remain as bilateral deals would be much more expensive for banks to carry on their books. Clearnet at around €800m ($1. Tired of such dalliances, the LSE has taken up with the plumber. Clearing-houses are the back-room wizards of the exchange-traded securities and derivatives markets. All of which means that the volume of business flowing to clearing-houses, and the fees they can charge, will increase. They ensure that once a deal has been agreed upon it will be honoured, even if one of the parties goes bust. Some OTC derivatives are already centrally cleared: LCH. Plumbing problems Trade News selected by Local Linkup on 04/04/2012