Policymakers should encourage central counterparty clearing services and standardization of contracts, a Fed official told a subcommittee of the U.S. Senate Committee on Banking, Housing, and Urban Affairs.
“Supervisors … need to continue to foster collective actions by dealers and other market participants to move rapidly toward the goal of implementing a clearing and settlement infrastructure for the credit derivatives market and other OTC derivatives markets that is as efficient as the infrastructure for more mature markets,” says Patrick M. Parkinson, deputy director, Division of Research and Statistics of the Board of Governors of the Federal Reserve System. “Supervisors and other policymakers should encourage the introduction and use of well-designed CCP clearing services for credit derivatives and should encourage greater standardization of contracts, which would facilitate more trading on exchanges. Supervisors and other policymakers should encourage the introduction and use of well-designed CCP clearing services for credit derivatives and should encourage greater standardization of contracts, which would facilitate more trading on exchanges.”
A pdf version of Parkinson’s full testimony before the Subcommittee on Securities, Insurance, and Investment is available on the committee’s website.