FMP 6. Central Clearing

Learning Objectives

1) Provide examples of the mechanics of a central counterparty (CCP).

2) Describe the role of CCPs and distinguish between bilateral and centralized clearing.

3) Describe advantages and disadvantages of central clearing of OTC derivatives.

4) Explain regulatory initiatives for the OTC derivatives market and their impact on central clearing.

5) Compare margin requirements in centrally cleared and bilateral markets and explain how margin can mitigate risk.

6) Compare netting in bilateral markets vs centrally cleared markets.

7) Assess the impact of central clearing on the broader financial markets.

8) Identify and explain the types of risks faced by CCPs.

9) Identify and distinguish between the risks to clearing members and to non-members.