proem

Business, Management and Accounting

4 years ago

Financial Markets Transformed: Central Clearing Boosts Trade and Risk-Sharing

HEC Research Papers Series

Completing Markets With Contracts: Evidence From the First Central Clearing Counterparty

Guillaume Vuillemey

Paper Summary

Business, Management and Accounting

4 years ago

Financial Markets Transformed: Central Clearing Boosts Trade and Risk-Sharing

HEC Research Papers Series

Completing Markets With Contracts: Evidence From the First Central Clearing Counterparty

Guillaume Vuillemey

Paper Summary

Central clearing counterparties (CCPs) for derivatives were introduced in 1882, changing how financial markets operate. By analyzing trade data, it was found that CCPs shifted trade flows in Europe, benefiting Le Havre. This innovation helped reduce risks and solved market inefficiencies, leading to increased gains from trade. The success of CCPs led to their adoption in other exchanges.