Clearing members fear $5 billion intra-day funding burden
Clearing houses can call for margin multiple times a day to protect against wild markets. But the burden of meeting those calls will initially fall on member firms – potentially creating a source of severe funding stress. By Matt Cameron
It's a clearing house risk manager’s nightmare – a day has passed since it last collected margin from its members, markets have tanked, and there is a margin gap that won’t be filled because two member firms have filed for bankruptcy overnight. To cover the losses, the central counterparty (CCP) will have to draw on the initial margin reserves posted by the defaulting firms, and if markets continue to swing, the damage could spill into the rest of the CCP’s default waterfall.
That’s why most
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Clearing
Thin-skinned: are CCPs skimping on capital cover?
Growth of default funds calls into question clearers’ skin in the game
Girolami to leave LCH for NatWest
Clearing house CEO named CIB head for UK lender
Derivatives funding: smart solutions for a complex environment
Eurex’s cleared repo and GC Pooling offerings are helping market participants overcome challenges in the funding, financing and collateral markets
Taming the systemic risk Hydra: 10 years of mandatory clearing
Regulators, clearers and market participants reflect on a decade of the clearing requirement
Switching CCP – How and why?
As uncertainty surrounding Brexit continues and the impacts of Covid-19-driven market volatility are analysed, it is essential for banks and their end-users to understand their clearing options, and how they can achieve greater capital and cross…
BNP leads a comeback for Europe’s clearers
Brexit, leverage ratio tweaks and concentration fears could help European banks compete with US FCMs
Clearing conundrum – Forging a solution for the bilateral market
Central clearing has had a beneficial effect on the over‑the‑counter derivatives market, but for some products the road to a cleared model has not been smooth. Capital, operational and margin costs of the non-cleared market have increased, while…
Clearing conundrum – Forging a solution for the bilateral market
Sponsored webinar: LCH