Twenty-Four Hour Trading, Clearance, and Settlement: The Role of Banks
The world’s capital markets are entering a very exciting era. Equity and derivative exchanges are extending their trading hours either by keeping their floors open longer and/or by developing electronic trading systems that support trading 24 hours a day. Exchanges are also offering products traded and settled in currencies other than that of their home country. All of these developments are considered to be good news for the trader, who may eventually be able to pass his position book with the sun and trade whatever, whenever, and wherever he wants to. However, demand must be balanced by supply: exchanges will only offer these new products if they have both market depth and a set of back-room processes and procedures that ensure that all buyers and sellers fulfill their obligations. These procedures allow exchanges to transfer market risk to the clearinghouses, which in turn transmit that risk to the banking system, clearing members, and their clearing members’ customers (see Figure 15–1).1
KeywordsCentral Bank Banking System Banking Relationship Variation Margin Wire System
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