On the choice of central counterparties in the EU

Journal article: We study competition between European Union’s Central CounterParties (CCPs) on the credit default swap (CDS) market. Using data on market shares, we show that CCPs have a monopoly for single-name CDSs and compete on indices along various dimensions. Using transactions data, we focus on the major dealers who alternatively clear their transactions on the two main CCPs. Estimating their choice of CCP reveals that fees, CCPs’ robustness and activity, dealers’ risk, and market volatility are significant. Dealers’ positions indicate that saving on collateral costs is secondary relative to the benefits of dual membership and quality.

Author(s)

Gabrielle Demange, Thibaut Piquard

Journal
  • Journal of Financial Markets
Date of publication
  • 2023
Keywords JEL
G18 G20 G23 G33
Keywords
  • Central counter-party
  • Central clearing
  • Dealers
  • Collateral
Version
  • 1
Volume
  • 64