Academic journal article Economic Perspectives

Issues Related to Central Counterparty Clearing: Opening Remarks

Academic journal article Economic Perspectives

Issues Related to Central Counterparty Clearing: Opening Remarks

Article excerpt

First of all, I would like to say that I am extremely delighted to welcome you to this conference and to Frankfurt--a city that offers a huge variety of facets based on almost 2,000 years of history. Frankfurt was not only the home of important writers and philosophers, such as Goethe, Schopenhauer, and Adorno, it has also over the centuries prospered as a marketplace and magnet for business. Key to this success was its central location at the crossroads of large trading routes between the North and South and the East and West. Finance followed trade, and early on, Frankfurt became not only the home of large trade fairs but also an important financial center. It was one of the birth places of our modern stock exchanges, bringing about early financial innovations, such as trade with derivatives or bonds. When I look at the history of Chicago, I see a lot of similarities to Frankfurt: Chicago developed from a trading hub of agricultural products into a financial metropolis with a very potent stock exchange.

I am therefore very proud that this conference is a joint conference organized by both the European Central Bank (ECB) and the Federal Reserve Bank of Chicago (Chicago Fed), and I would like to give a particularly warm welcome to all our colleagues from Chicago. Cooperation between the ECB and the Chicago Fed is very well established: We have close bilateral exchanges and meet regularly in international meetings. Yet, most of our cooperation is often rather invisible to the public at large. Thus, I am particularly glad that this conference highlights visibly the close collaboration between the ECB and the Chicago Fed. It also demonstrates that we witness similar developments in both the United States and Europe and that we can benefit from each other's experiences by analyzing these developments together.

As you can see from the program, this two-day conference aims at exploring the foundations of central counterparties (CCPs), the importance of collateral and margining, issues related to risk management, and future developments of financial market clearing and settlement. The conference provides a unique forum for discussion and will allow participants to interact with industry executives, policymakers, central bankers, and academics. I am confident that by the end of the conference, we will all have a better understanding of the driving forces, practical arrangements, and the legal environment within which the CCPs operate in the European Union (EU) and the United States, as well as the future developments of financial market clearing and settlement.

Before I give the floor to the panelists, I would like to set the stage by presenting ten statements on key issues related to central counterparty clearing. I will emphasize our wish to achieve an efficient, sound, and stable "domestic" securities market infrastructure in Europe.

Central banks have an keen interest in the smooth functioning of central counterparty clearing

Central counterparties represent an integral element of securities settlement systems. Although a CCP has the potential to reduce the risk exposures of market participants, it also concentrates risks and the responsibility for risk management. In the light of the growing interest in developing CCPs and expanding the scope of their services, central banks have a strong interest in the development of a coherent and integrated securities clearing and settlement infrastructure. Although the Eurosystem is not directly involved in the regulation of CCPs, issues related to the clearing and settlement infrastructure touch on the key responsibilities of central banks:

* The smooth functioning of payment systems, and

* The preservation of financial stability.

Guided by these objectives, the Eurosystem has explicitly expressed its interest in monitoring, understanding, and promoting the development of sound, efficient, and safely functioning financial market infrastructures. …

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