Regulation of Central Counterparties (CCPs) in Light of Systemic Risk

Against the background of the economic dynamics of financial markets, this book examines the EU regulatory and supervisory framework for central counterparties (CCPs) that clear derivative contracts.
Evariest Callens
Instituut Financieel Recht
book | published | 1st edition
April 2022 | xxviii + 700 pp.


ISBN 9781839702402

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Against the background of the economic dynamics of financial markets, this book examines the EU regulatory and supervisory framework for central counterparties (CCPs) that clear derivative contracts. The book combines a deep technical regulatory analysis of the applicable EU and US rules with a policy-oriented perspective, offering novel insights for both policymakers and practitioners, particularly with respect to CCP market access regimes.

Years before the 2008 financial crisis, Wall Street magnate Warren Buffett described derivative contracts as “financial weapons of mass destruction”. This book analyzes why and how—in a bid to discharge the destructive forces that derivatives may entail—international policy initiatives have converted CCPs for derivatives into the nuclear powerhouses of modern financial markets. Trillions of euros now change hands through these institutions every year. This risk centralization has turned CCPs into powder kegs with the potency to ignite financial and economic crises. Viewed through this lens, regimes for CCP market access constitute a pivotal safety valve for financial stability. In the post-Brexit era, the question of how this safety valve ought to be designed has taken center stage in the political arena but has remained vastly undertheorized.

By examining how CCPs serve as risk managers and loss absorbers, under what conditions they can become sources of financial instability, and how the body of literature on the different emanations of systemic risk may be applied to the market for centrally cleared derivatives, this book develops a framework for thinking about the structure of CCP market access regimes. The book then employs this framework to assess the EU rules for CCP market access. The outcome of this exercise suggests that the increasingly inward-looking EU approach towards CCP market access may not promote financial stability.

EVARIEST CALLENS is a Postdoctoral Researcher at the Financial Law Institute of Ghent University. He holds a Master in Law, a Complementary Master of Science in Economics, and a PhD in Law, all from Ghent University.

Table of Contents

Table of Contents and Preliminary Pages (p. 0)


Chapter 1. State of Play (p. 1)

Chapter 2. Research Project (p. 17)


Chapter 1. An Anatomization of Derivative Contracts (p. 29)

Chapter 2. The Lifespan of Centrally Cleared OTC Derivatives (p. 85)


Chapter 1. Regulatory Interventionism in OTC Derivatives Markets (p. 249)

Chapter 2. Systemic Risk in Centrally Cleared OTC Derivatives Markets (p. 333)

Chapter 3. EU and US CCP Market Access Regimes (p. 395)

Chapter 4. EU CCP Recovery and Resolution Regime (p. 549)

General Conclusions (p. 609)

Bibliography (p. 625)

About the series:

Instituut Financieel Recht

Het Instituut Financieel Recht - Financial Law Institute werd in 1990 als onderzoekscentrum binnen de Faculteit Rechten van de UGent opgericht. Het Instituut streeft ernaar om vooraanstaand wetenschappelijk onderzoek en expertise te ontwikkelen en uit te dragen in het financieel recht in de ruime zin, onder meer door de organisatie van colloquia, het stimuleren van doctoraatsonderzoek en de medewerking aan onderzoeksprojecten.

Het Instituut poogt hierdoor de ontwikkelingen die het financieel bestel voortdurend ondergaan vanuit wetenschappelijke invalshoek te bestuderen en te duiden. Het Instituut wenst hierbij niet enkel de evoluties in eigen land te volgen, maar kijkt tevens over de grenzen naar de ruimere Europese en internationale context. Naast deze publicatiereeks, lanceerde het Instituut eveneens in 1999 een Working Paper Series, dat een deel van de onderzoeksoutput via Internet beschikbaar stelt.

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