CCP
WHAT IS THIS? A central counterparty (CCP) manages default risk by collecting initial and variation margin from both parties to a trade. Spill-over losses are absorbed via a default fund to which all members contribute – introducing a degree of mutualised risk – and by the CCP’s own capital. The concept is an old one that was extended to over-the-counter derivatives in the aftermath of the financial crisis.
Eurex liquidity pool jumps 39% as required IM rises
Members of the IRS clearing unit saw the largest increase of required margin in Q2
IM at three LCH clearing units rose in Q2
Increase in clearing volumes pushed collateral up at EquityClear, RepoClear and SwapClear
Ice Credit’s required initial margin up 18% in Q2
CCP reported highest level on record, superseding Covid-19-induced peak
Liquidity risk up 138% at Eurex in Q2
CCP revised estimated worst-case payment obligation to highest level on record
Banks face capital hit on broader energy market collateral
Non-standard clearing house margin for energy trades would increase RWAs unless relief granted
European pension funds must start clearing next year – EC
Exemption preventing pension funds from mandatory clearing will come to an end permanently in June 2023
CFTC backs banks in tussle over clearing house governance
CME and Ice will need to pay more attention to clearing members on risk committees
Peak IM call at OCC jumps 38% in Q2
Outsized equity price moves behind third-largest IM call on record
Bypassing consent may aid CCP porting – report
CPMI-Iosco report says clearing houses cannot reasonably accommodate client preference; brokers favour rule book harmony
“Closing the gaps: moving forward on tail risks in central clearing”: a central bank of issue perspective
The authors explain the priorities for CCP recovery and resolution from a central bank of issue perspective, focussing on structural barriers and how gaps could be overcome.
Interest rate vol triggered three breaches at CME in Q2
CCP’s interest rate swaps clearing unit reported its first initial margin shortfalls since Q3 2020
Esma to meet with clearing industry over EU energy crisis
Widening eligible collateral on table; ECB intervention would need government indemnities
CME preps April Eurodollar conversion
US exchange selects April 14, 2023 to flip open interest in heavily traded Libor contracts to SOFR
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
LME member default fund contribution jumps 89%
Following record-breaking margin breach in Q1, the CCP plumped up its line of defence
Choice of margin period of risk and netting for computing margins in central counterparty clearinghouses: a Monte Carlo investigation
The authors provide a quantitative comparison for evaluating the impact of collecting margins in a gross-versus-net system with the margin period of risk (MPOR) set to between one and five days.
Esma warns new foreign clearing house rules could backfire
Löber says euro swaps trading may move away from CCPs that face toughest EU scrutiny
‘Very little support’ for a US Treasury clearing mandate – Isda
Dealers and clients prefer carrot to stick in efforts to improve Treasury market liquidity
LCH mulls FX spot clearing as buy-side demand grows
Anticipated ForexClear service could reduce funds’ reliance on prime broker credit lines
Share of required margin increases at top EU CCP members
Number of clearing members with total requirements of €10bn and above has been increasing since 2017
Options expiry triggered $135m liquidity shortfall at NSCC
The CCP collected supplemental liquidity deposits six times during the first quarter
Initial margin at Ice Europe up 15% over Q1
IM held against F&O positions hit all-time high, as number of margin breaches nudged higher
Eurex’s fixed income and IRS units hit by almost 700 breaches
Peak breaches in Q1 were €706 million and €214 million in size, respectively
JSCC swap surge triggers plea to rethink US client ban
With over two-thirds of yen RFR swaps volumes going to JSCC, calls grow for CFTC to ease clearing restrictions