Indirect clearing allows firms access to central counterparty clearing houses, or CCPs, without having to go through the expense and rigour of membership, by piggybacking off another firm’s membership.
Exactly how this would play out in practice remains deeply contentious. A consultation from the European Securities and Markets Authority, which ran from November 5 to December 17, has shown that an impasse exists over several key areas, not least of which is what happens when an indirect clearing client defaults. Some believe that managing the positions should fall to the clearing member to manage; others believe it should bypass them and go directly to the clearing house itself via a system of “leapfrog payments”.
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