Clearing houses, also known as central clearing counterparties (CCP), have been seen as the answer by policymakers. However, Robert Sams, the CEO of Clearmatics, believes the distributed ledger could be a real solution for the industry.
“The CCPs are now the largest counterpart to most of the players in the derivatives market and are ‘too big to fail’,” Sams told CNBC via email.
“Collateralization and resolution procedures are supposed to mitigate the risk of an event leading to public rescue, but these assumption-laden procedures are fragile and might be blown to bits upon first contact with market reality in times of stress. We should be decentralizing counterparty risk, not centralizing it.”
Sams, and his London-based firm Clearmatics, have been tasked with innovating with derivatives trading with a form of the public ledger similar to bitcoin’s. UBS is one big bank that has already shown an interest and reports state that many more are keeping a keen eye on the project.