I am a generalist investor, but once I get interested in an area I try to get to the bottom of it. My interest in clearinghouse started with this BIS article on the collapse of a small Nordic power clearinghouse. It was further stoked by an a report issued by the biggest users of clearinghouses asking for significant reform. As I was looking for a short selling trade on this, I tended to focus on listed clearinghouses. By far the most important clearinghouse is LCH, which does repo for European bonds, and interest rate derivatives globally. My biggest problem with clearinghouses was that they priced risk, but when things really went wrong, they suffered relatively minor consequences - a critique that is echoed in the report form the large banks.
In my last post, I had stated that CME cleared US treasury Repos, just as LCH clear gilts and European bond repos. This incorrect. US Treasury Repos are cleared by DTCC. DTCC is not listed, and remains owned by its members, which will be mainly large banks. As it was unlisted, I never analysed its IOSCO-CPMI disclosures. Having now had a look, the clearinghouse issue looks much clearer to me.
