Adoption of a Centralised Post-Trade Processing Market Infrastructure after the Credit Crisis

Abstract

The recent credit crisis has heightened the awareness of credit risk among financial markets' regulators and participants. However, despite the public discussion on centralized processing systems for the off-exchange traded (Over-The-Counter, OTC) transactions no research has been conducted on the factors that could explain their adoption among market participants. With this study, an attempt is made to cover this gap, in parallel opening the space for further scientific investigation on centralized clearing for OTC derivatives. Based on the Diffusion of Innovation Theory, this first empirical study in the OTC clearing area introduces a model aimed at identifying the drivers and inhibitors for the adoption of an IT-enabled innovation in the form of centralized clearing by the financial organizations. The partial least squares structural equation modeling technique was applied to analyze the results of the survey with the Heads of Clearing/ Operations in various international financial institutions.