The man in the middle—liquidity provision under central clearing in the credit default swap market: A regression discontinuity approach

In this study, I analyze the effect of central clearing on credit default swap (CDS) market breadth, depth, and resiliency using a regression discontinuity design. find evidence for decrease in absolute bid–ask spreads spread an increase gross trading volume with beginning clearing. However, we observe positive effects CDS liquidity only contracts high fundamental risk. Further results indicate that lower frictions, is, counterparty risk regulatory capital charges, may explain liquidity.