The financial inevitability of Clearing House consolidation

While I agree that the multiplicity of clearing houses is an inefficient carryover from the last century, theses are almost always national monopolies, with some sense of their own local importance, and often staffed by ex-central bankers with an exagerrated sense of their own importance. There are often quirks of local securities laws for transfer, registration, pledging, etc., which lend a colourable claim to the need for a local service. And local traders and investors prefer to transact in the local language with the local clearing house in the local currency. Although many of the costs of cross-border instruction by SWIFT and high fees by banks have been eroded, these costs are still a signficant factor in preserving local clearing houses. The whole point of TS2 was to preserve the existing inefficient diversity of existing clearers with a bit of expensive, over-engineered networking laid over it. And of course, to create more jobs for more surplus-to-requirements central bankers. Any sensible person who wants consolidated clearing in Europe can use the existing cross-border ICSDs, Euroclear and Clearstream, with standardisation of all processing and a single view of porfolios. The ICSDs perform extraordinarily well, compete on innovation and service, and know their cross-border business better than any local clearing house ever will.

There is no doubt a protective barrier to implmenting the changes that the market needs in clearing. I can not say how long this situation will last but i guess not for long. OTC in the frame could ignite the touch paper

I like the idea of an alternative to Clearing houses and see this as a quick and cost effective way of dealing with some of the problems at least. I am looking forward to giving these issues a good going over in the Post Trade Forum debate. It might be the only forum where a spade will be called a spade and the issues uncovered and decided upon

I was looking through my bookshelf today and found an article in RISK magazine I had written back in 1997 suggesting an architecture for a cross-border, cross-margining clearing house to optimise netting and the allocation of margin for globally active dealers. Maybe I should dust it off and try again?

Dust it off Kathleen! Its amazing how everything appears to change but nothing really. The time is here and now to make things happen