Can a Consortium Model Reduce Counterparty Risk in Derivatives Clearing More Effectively than a Private One?

A consortium model can be more effective at reducing counterparty risk in derivatives clearing than a private model. By distributing trust among multiple members, a consortium eliminates the risk of a single clearinghouse becoming a point of failure.

The shared ledger provides all participants with real-time visibility into exposures and collateral, fostering greater transparency and mutual oversight. This collaborative approach makes it harder for any single entity to default or manipulate the system, thereby strengthening the overall stability of the clearing process.