When CDOs go through “originate and distribute” process numerous times, the riskcreating entity cannot be clearly identified. For this reason, regulatory authorities were unable to fully comprehend the trade mechanism and the relevant data of CDOs when Lehman went bankrupt in September 2008. The purpose of surveillance is “to detect problems ahead of time and correct faulty elements”.
It is not necessary, or even necessarily efficient, for all financial institutions to participate directly in clearing and settlement. In the NPP, for example, there are three aggregators that provide indirect access to institutions that do not want to incur the cost of participating directly.