RDP 2013-12: Central Counterparty Links and Clearing System Exposures 6. Conclusion

We have explored, through a stylised model, how CCP links affect aggregate CCP exposure. CCP links cause two opposing effects on exposure: a benefit arising from inter-CCP netting and a cost arising from inter-CCP exposure. Our model finds that, under a wide variety of plausible assumptions about parameters, participation and the distribution of obligations, the netting benefit dominates, and that CCP links can decrease aggregate exposure. To the extent that collateral requirements reflect underlying exposures, this implies that CCP links can economise on collateral.