ECB Board Member Wants European Centralized Clearing Systems For CDS

HTML clipboardINTERLAKEN, SWITZERLAND -(Dow Jones)- Jos? Manuel Gonz?lez-P?ramo, Executive Board Member of the European Central Bank, Wednesday called for a centralized clearing system in Europe for credit default swaps and other complex derivatives which figured heavily in prompting the financial crisis.

Market participants as well as regulators must work together to create a working system for centralized clearing and must be careful to avoid a system of arbitrage between different regulators, Gonz?lez-P?ramo said. His remarks started off a three-day conference on derivatives and their role post the financial crisis with industry leaders in Interlaken, Switzerland. Centralized clearing is expected to be a key topic at the event, according to several participants.

Proponents say such centralized clearing parties (CCPs) offer increased transparency and risk management benefits by clearing all trades under one umbrella platform. So-called, over the counter (OTC) trades, carried out directly between buyers and sellers without a third-party exchange, are considered less transparent and were criticized for their role in prompting the financial crisis.

Exchange operators such as Germany's Deutsche Boerse AG (DB1.XE) have already started offering services for centralized clearing of some OTC derivatives, but a pan-European system is yet to be established.

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