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II Structural Elements of Clearing, 7 What Kind of Thing Is a Central Counterparty?: The Role of Clearing Houses as a Source of Policy Controversy »

Rebecca Lewis, David Murphy
From: Clearing OTC Derivatives in Europe
Edited By: Bas Zebregs, Victor de Seriere, Rezah Stegeman, Patrick Pearson
Public policy regarding central counterparties (CCPs) is beset by conflicts. These turn on who bears which risks, who profits from clearing, and who has what say in CCP governance. To probe these conflicts, we introduce three stylized models of CCPs: utilities, for-profit corporations under shareholder primacy, and clubs. Each suggests a different resolution to a given conflict. However, none provides wholly compelling answers, nor fully maps onto current practice. We suggest that the root cause of the continuing conflicts is a fundamental disagreement over the role of the CCP. Given this ongoing, irresolvable disagreement, stakeholder theory provides a good model of CCP governance.