The concept of using central counterparties, or a clearing house, has been very much in the news over the past couple of weeks. At times, it seems there is a propaganda campaign being waged by those in favour of CCPs and those who prefer the bilateral credit-trading model that dominates FX.
Both models have their merits and their weaknesses. It is often claimed that trading on regulated exchanges is safer than in OTC because of the use of a CCP as risk mitigator.
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