Other initiatives: central counterparties The idea of an international dispute resolution facility for the financial markets fits well in a rapidly changing environment. Both in the United States and in Europe, central counterparties [CCPs] for the central clearing of derivatives have been launched. ICE Clear Europe for instance clears credit default swaps and SwapClear is a CCP for interest rate swaps.
As one example, some observers contend that new capital and liquidity rules have led to reduced market-making in secondary fixed-income markets and may also be responsible for occasional liquidity shortfalls and market gaps. We analyze this vulnerability in greater depth in today’s FSR. In fact, it is proving very difficult to assess the liquidity issue empirically.