Credit worries slow OTC oil trading

which illustrates that the credit ripples are spreading....

They said credit worries were also spurring a shift to clear over-the-counter oil trades, such as price swaps, on NYMEX Clearport, which offers clearing for some OTC derivatives.

"It's driving a lot of people toward doing cleared OTC business, we've seen that to quite a degree," said Christopher Bellew, a broker at Bache Commodities Limited.

On the face of it, that has to be a good thing in terms of regulatory risk and transparency to the regulators.

But as I have pointed out elsewhere, I don't think either market participants or regulators appreciate that clearing houses are as much a "single point of failure" as Fannie Mae and Freddie Mac are.

They have in common the fact that they both support a pyramid of price risk supported by a sliver of capital. As I have recently said - again - the risk of "Black Swan" events wiping out that capital is far higher than is generally appreciated

Oil markets: an accident waiting to happen

Moreover, the ongoing move by the Intercontinental Exchange to clear their own business

Ice Clear Europe

(and thereby make more money from what is known in the trade as a "vertical silo" approach) is temporarily on hold

Clearing transition postponed

during the current market turbulence.

No doubt the FSA is asking them very searching questions about their risk management.

But the bottom line is that the pool of capital supporting these transactions after the transition must - as far as I can see - be less than it is when the risk lies in London Clearing House's risk pool of capital which covers several other markets beyond oil.

Another classic case of the profit motive acting to increase systemic risk,