Focusing on contracts that are eligible for clearing, authors investigate the factors that drive clearing members' decision to clear. First, we find that both capital costs and margin costs are relevant for the decision to clear, with some differences among the three sovereign CDS contracts. For the Italian sovereign CDS, the counterparty credit risk exposure is more relevant than the margin costs in the decision to clear, while for the German sovereign CDS contracts margin costs are the most important. Instead, for the French sovereign CDS contract it is difficult to disentangle which of the two main drivers prevails. Second, they find that when a net seller of a specific sovereign CDS buys an additional contract, its propensity to clear increases. This finding is robust across reference entities, indicating that portfolio positions with the CCP also matter on the decision to clear the single contracts. Finally, they find that the counterparty credit risk alone is an important incentive to clear a contract, as this factor is significant for all analyzed reference entities. Their study has several potential policy implications. First, it shows that the indirect clearing of nonclearing members, independently whether they are subject to capital requirements, is very low. Thus, regulators should further investigate reasons for this, and better understand the cost factors and other potential obstacles for client clearing. Second, results show that factors impacting the incentives for central clearing are not the same for all analyzed CDS reference entities. Finally, analysis shows that the decision to clear is also related to net exposure with the CCP, in addition to the characteristics of the contract and the counterparty credit risk.