The Role of Primary Dealers in Mitigating Liquidity Risk at U.S. Central Counterparties

Cindy E. Hull and Brett Solimine

Chicago Fed Letter, 2025, vol. 510, 8

Abstract: In this article, we examine the role of primary dealers as clearing members at U.S. central counterparties (CCPs) and their importance in liquidity risk management at those CCPs. We find that primary dealers are key contributors to concentration in central clearing—they make up a significant portion of clearing members and an even larger portion of activity cleared by U.S. CCPs. Second, we find that primary dealers are a major source of interconnectedness across U.S. CCPs. Further, we estimate that the bulk of clearing activity in the U.S. is conducted by the primary dealers that are also the most interconnected across CCPs.

Keywords: Central counterparties; standing repo facility; general financial markets; non-bank financial institutions; institutional investors; monetary policy (search for similar items in EconPapers)
JEL-codes: E59 G10 G19 G23 (search for similar items in EconPapers)
Date: 2025
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