Short-term prognosis for CDS clearinghouse

We've been discussing the various proposals to automate clearing and settling of credit derivatives fairly frequently, as of late. We noted last week that one or more could be up and running as soon as this month, though it will take a while for trades to migrate to the new system. Business Week weighs in with an article on the CDS market, noting that we may be looking at a "bifurcated market" in the near term. We may see new trades migrate to new clearinghouses. While that's good news, outstanding contracts will still be in place without a clearinghouse between the counterparties. And at least one expert thinks that once the crisis has passed, the OTC market will come roaring back, which gets at the critical point in all of this: Dealers have the power to make or break clearinghouses. They clearly will not embrace anything whole heartedly that eats into their margins.  

For more:
- here's the article

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