The Economics of Central Clearing: Theory and Practice
Central Clearing is a key component of regulatory reforms for OTC derivatives. A centrally cleared transaction will be cheaper than a bespoke bilateral. This extract, from a paper called 'The Economics of Central Clearing: Theory and Practice' by Craig Pirrong, explains why: Executive Summary (pages 2-3): Regulations requiring the clearing of certain OTC derivatives through central counterparties ('CCPs') are causing a profound change in market structure and trading practices