Before revision:  Although CCLs are designed to help institutions mitigate counterparty risk by selective diversification of their exposures , their implementation restricts the liquidity that institutions can access in an otherwise centralized pool. We address the question of how this mechanism impacts trade prices and volatility, both empirically and via a new model of trading with CCLs.
After revision:  Although CCLs are designed to help institutions mitigate counterparty risk by selective diversification of their exposures . In this paper, we analyze how CCLs impact the prices that institutions pay for their trades during everyday trading. We study a high-quality data set from a large electronic trading platform in the foreign exchange spot market, which enables institutions to apply CCLs.