LCH points out danger of regional differences in clearing regulation

In an interestingĀ letter in today’s FT, Roger Liddell, CEO of LCH.Clearnet raises the issue about global clearing houses vs localised clearing houses. The problem with the way the debate is going on future regulation is that each region is developing different models. If this continues we run the risk of the current global market in all sorts of products being fragmented into competing blocs. This will not be a good thing for the industry.

Roger succinctly concludes in his letter:

“As regulators and policymakers rightly seek to reform the financial system it is essential that the vital issue of reducing systemic risk does not become hostage to narrow commercial interests seeking to take advantage of the concerns engendered by this crisis. Systemic risk is a global issue and requires a global approach from policymakers and supervisors”.

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One comment on “LCH points out danger of regional differences in clearing regulation
  1. Hugh Simpson says:

    There seem to be contradictory points in Roger Liddells’ letter.

    1 “These are global markets and the products are traded by global institutions” so presumably they should be free to clear in the place that best meets their needs. [Of course, to make this truly effective requires a network of interoperability arrangements so that different global institutions can make different choices – but that is another story.]

    2 “Systemic risk is best addressed by having one central clearing house for any given product” – in other words, clearing should be forced into a single clearing house for each product. This may be local for some people, but foreign for others.

    I am left unclear whether the letter is arguing for more choice or less choice.