Clearing houses, or CCPs, were among the very few organisations to
emerge from the global financial crisis with their standing
enhanced. In the chaotic aftermath of the bankruptcy of Lehman
Brothers, they successfully completed trades worth trillions of
dollars in a multitude of financial instruments across listed and
over-the-counter markets, and so helped avert financial Armageddon.
That success transformed the business of clearing. Governments
and regulators around the world gave CCPs and the clearing services
they provide a front-line role in protecting the global economy
from future excesses of finance. CCPs, which mitigate risk in
financial markets, responded by greatly expanding their activities,
notably in markets for over-the-counter derivatives, and often in
fierce competition with one another.
In "The Risk Controllers," journalist and author Peter Norman
describes how CCPs operate, how they handled the Lehman default,
and the challenges they now face. Because central counterparty
clearing is a complex business with a long history that continues
to influence decisions and structures even in today's fast changing
world, "The Risk Controllers" explores the development of CCPs and
clearing from the earliest times to the present.
It draws on the experiences of the people who helped to shape
the business of clearing today. It sets the development of CCPs and
clearing in the broader context of changes in society, politics and
regulation. The book examines turning points, such as the 1987
stock market crash, that set clearing on a new path and the impact
of long running trends, including the exponential growth of
computer power and the ebb and flow of globalisation.
Written in non-technical language, "The Risk Controllers"
provides a unique and accessible guide to CCPs and clearing. It is
essential reading for clearing professionals, legislators and
regulators whose job it is to take this vitally important business
into the future.
""The recent crisis has, thankfully, renewed interest in the
importance of central counterparties: how they can help preserve
stability or, as Hong Kong showed in 1987, undermine stability if
they are not super sound. Peter Norman's book places the role of
clearing houses in a historical context, and explains why the
financial system's plumbing matters so much. It should be read by
anyone interested in building safer capital markets.""
Paul Tucker, Deputy Governor Financial Stability, Bank of
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