A summer daydream, part 1 July 31, 2013 at 6:11 am
In a city park, perhaps in Brussels, perhaps in Washington, perhaps elsewhere, it is hot. A regulator named Alice lounges on a park bench on her day off. She feels the heat of the sun, and, exhausted by her labours, she falls asleep…
… when suddenly a White Rabbit with pink eyes ran close by her. There was nothing so very remarkable in that; nor did the regulator think it so very much out of the way to hear the Rabbit say to itself, ‘Oh dear! Oh dear! I shall be implementing late!’ (when she thought it over afterwards, it occurred to her that she ought to have wondered at this, but at the time it all seemed quite natural); but when the Rabbit actually took a draft regulation out of its waistcoat-pocket, and looked at it, and then hurried on, the regulator started to her feet, for it flashed across her mind that she had never before seen a rabbit with either a waistcoat-pocket, or a draft regulation to take out of it, and burning with curiosity, she ran across the field after it, and fortunately was just in time to see it pop down a large office door under the hedge.
In another moment down went Alice after it, never once considering how in the world she was to get out again.
When Alice got inside, it was all dark overhead; before her was a long passage, and the White Rabbit was still in sight, hurrying down it. There was not a moment to be lost: away went Alice like the wind, and was just in time to hear it say, as it turned a corner, ‘Oh my ears and whiskers, how late it’s getting!’
When she came near the Rabbit, she began, in a low, timid voice, ‘If you please, sir—’ The Rabbit started violently, dropped the regulation, and skurried away into the darkness as hard as he could go.
Alice picked up the document. “The Regulation on Central Counterparty Central Counterparties” it was titled. “At the September 2009 summit in Pittsburgh, G20 leaders agreed that all standardised OTC derivative contracts should be cleared through a central counterparty (CCP) by the end of 2012. However, there are now a multiplicity of CCPs, and information concerning them is usually only available to the contracting parties. CCP interoperations threaten to increase counterparty credit risk, interconnection and market fragmentation. Just as CCPs are the solution to these problems in the bilateral OTC derivatives market, so central counterparty central counterparties (CCPCCPs) are the solution to CCP interoperation. This regulation sets standards for CCPCCPs. Moreover, as incentives to promote the use of CCPCCPs have not proven to be sufficient to ensure that intra-CCP exposures are in fact cleared centrally, mandatory CCPCCP clearing requirements for those CCP exposures that can be cleared centrally are therefore necessary.”
Curiouser and curiouser thought Alice.
To be continued…