The impact of margin requirements on voluntary clearing decisions

Esen Onur, David Reiffen and Rajiv Sharma

Journal of Financial Markets, 2024, vol. 68, issue C

Abstract: This paper examines the incentives to voluntarily centrally-clear swaps. It exploits changes resulting from a regulation mandating collateral on uncleared swaps to analyze determinants of traders’ clearing decisions. The rule promoted voluntary clearing by decreasing the relative cost of clearing swaps. Using unique regulatory data, the paper finds that clearing more than quadrupled for exchange rate derivatives that were implicated by this regulation, while clearing for similar but exempt derivatives increased by about one-third. These changes were driven by traders who were already clearinghouse members, suggesting that clearing members have substantially lower marginal clearing costs.

Keywords: Uncleared margin rule; NDF; CCP; Clearing; Margin (search for similar items in EconPapers)
JEL-codes: G15 G18 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:68:y:2024:i:c:s1386418124000107

DOI: 10.1016/j.finmar.2024.100892

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