Actual Cleared Volumes vs. Mandated Cleared Volumes: Analyzing the US Derivatives Market

Encouraging the clearing of standardized derivatives has been a major priority for policy-makers. This has primarily been pursued through the implementation of clearing mandates, but other incentives also exist – netting and capital benefits, and the rollout of margining requirements for non-cleared derivatives, for example. As a result, the majority of interest rate derivatives (IRD) traded notional is now cleared.

This paper analyzes the volume of cleared derivatives to determine the impact of these incentives. In particular, the paper compares cleared notional amounts of over-the-counter (OTC) derivatives with the amounts subject to the US Commodity Futures Trading Commission (CFTC) clearing mandate. The results show that market participants clear more transactions than required under the CFTC’s clearing mandate.

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