Does the Anonymity of a CLOB Increase or Decrease Concerns about Counterparty Risk?
The anonymity of a CLOB decreases immediate concerns about counterparty risk for the trader, but only because that risk has been transferred to a central clearing house (CCP). Traders do not need to know or trust who is on the other side of their trade because the CCP guarantees settlement.
Therefore, the anonymity is a feature enabled by the CCP's risk management. However, it concentrates systemic risk onto the clearinghouse itself.
If the CCP were to fail, the entire market would be exposed, a far greater risk than any single counterparty default.
Glossar
CLOB
Execution ⎊ Central Limit Order Books (CLOBs) represent the foundational infrastructure for price discovery and trade execution within cryptocurrency exchanges and regulated derivatives markets, functioning as a digitized order book mirroring traditional financial systems.
Anonymity
Concealment ⎊ Anonymity within cryptocurrency, options, and derivatives markets represents a spectrum of techniques employed to obscure the link between transaction origins and identifiable entities, impacting market surveillance and regulatory oversight.
Counterparty Risk
Exposure ⎊ Counterparty risk represents the potential loss incurred when a trading partner defaults on their contractual obligations.