Title: Comparing the pre-settlement risk implications of alternative clearing arrangements
Description: "In recent years, there has been a marked expansion in the range of products cleared through  central counterparty clearing houses, accompanied by a trend towards consolidation in the  clearing infrastructure. The financial stability implications of these developments are of  considerable policy interest. In this paper, we use a simulation approach to analyse, in a  systematic way, the potential pre-settlement cost and risk implications of these developments.  Our results point towards substantial risk-reduction benefits from multilateral clearing  arrangements, arising from multilateral netting and mutualisation. The paper also examines  individual incentives to join multilateral clearing arrangements. We suggest that arrangements  with restricted direct participation and tiered membership may be a natural response to the  uneven distribution of total pre-settlement costs when agents are of heterogeneous credit quality  and it is costly to individually tailor margin."--Bank of England web site.