Risk Quantum/Japan Securities Clearing Corporation (JSCC)
EU and UK CCPs dominated by foreign members
Non-domestic clearing members accounted for over 70% of LCH’s and Eurex’s pool in Q3
CCPs’ largest members account for almost half IM
Analysis of 30 clearing services shows wide dispersion in concentration risk – with LCH and JSCC leading the pack
JSCC’s bond and IRS units hit by almost 200 breaches
Q2 volatility triggered some of the largest initial margin breaches ever reported by the CCP
At JSCC, required initial margin up 20% in Q1
The bulk of the increase came from members of the clearing service covering ETPs
Liquidity risk rose at most CCPs in Q3
JSCC, CME, Ice and Eurex among those that revised their VM estimates
JSCC member received $3bn cash call in Q3
The CCP revised its estimate of the worst-case payment obligation that would have to be met should one of its participants collapse
JSCC turns to commercial banks in rejig of liquidity reserves
Funds stashed at the Bank of Japan down 31% on the previous quarter
JSCC issued $2.8bn VM call on a clearing member in Q1
The call was for a participant in the CCP’s clearing services that cover IRS, CDS and exchange-traded financial products
JSCC incurred 311 IM breaches in 2020
IRS service experienced the largest breach last year
Top CCPs invest little clearing member cash in securities
Cash payments of initial margin and default fund contributions are typically placed with central banks
Skin in the game of top CCPs varies
The average default fund has less than 4% of total resources contributed by the host CCP itself
JSCC increases skin in the game after merger
CCP added ¥2.4 billion to cover commodities contracts