The Risk Controllers (PDF)

Clearing houses, or CCPs, were among the very few organisations to
emerge from the global financial crisis with their standing
enhanced. In the chaotic aftermath of the bankruptcy of Lehman
Brothers, they successfully completed trades worth trillions of
dollars in a multitude of financial instruments across listed and
over-the-counter markets, and so helped avert financial Armageddon.

That success transformed the business of clearing. Governments
and regulators around the world gave CCPs and the clearing services
they provide a front-line role in protecting the global economy
from future excesses of finance. CCPs, which mitigate risk in
financial markets, responded by greatly expanding their activities,
notably in markets for over-the-counter derivatives, and often in
fierce competition with one another.

In The Risk Controllers, journalist and author Peter
Norman describes how CCPs operate, how they handled the Lehman
default, and the challenges they now face. Because central
counterparty clearing is a complex business with a long history
that continues to influence decisions and structures even in
today's fast changing world, The Risk Controllers
explores the development of CCPs and clearing from the earliest
times to the present.

It draws on the experiences of the people who helped to shape
the business of clearing today. It sets the development of CCPs and
clearing in the broader context of changes in society, politics and
regulation. The book examines turning points, such as the 1987
stock market crash, that set clearing on a new path and the impact
of long running trends, including the exponential growth of
computer power and the ebb and flow of globalisation.

Written in non-technical language, The Risk Controllers
provides a unique and accessible guide to CCPs and clearing. It is
essential reading for clearing professionals, legislators and
regulators whose job it is to take this vitally important business
into the future.

"The recent crisis has, thankfully, renewed interest in
the importance of central counterparties: how they can help
preserve stability or, as Hong Kong showed in 1987, undermine
stability if they are not super sound. Peter Norman's book
places the role of clearing houses in a historical context, and
explains why the financial system's plumbing matters so much.
It should be read by anyone interested in building safer capital
markets."

Paul Tucker, Deputy Governor Financial Stability, Bank of
England