As the trauma of the financial crisis turns to analysis and proposals to prevent it happening again, we hear much about law makers’ and regulators’ desire to see the OTC derivatives markets tamed.

It is clear to everyone that the exchange traded derivatives markets, with their associated central clearing and settlement mechanisms, fared well in the crisis.  The smooth unwinding of Lehman Brothers’ positions held by the clearing houses appears to have been a model of how a major default should be handled.

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