This potential concentration of risk has several dimensions. First, if one of the direct clearing members fails, that poses risks to the CCP and to the other direct clearing members. Second, the failure of one of these large institutions would pose risks to institutions that clear indirectly through it.
Third, the offshore dealers may be able to use their dominance in direct clearing to heighten their competitive edge in other financial market activities, such as trading and other investment banking services. That, in turn, could lead to greater concentration of business, and of risk, across a whole range of activities.