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.
Margin scuffle at Eurex blurs lines between risk and returns
Disagreement over liquidity risk add-ons may owe more to self-interest than risk management
European lawmakers urged to prevent CCP contagion risk
Watchdog says carve-out needed in new recovery and resolution rules to avoid cascading default of clearing houses
US benchmark switch splits swaptions market
Some users ignore new guidance to nominate SOFR for swap discounting
Now is not the time to change the rules on CCP resolution
FSB overstepping brief by putting CCP operators’ equity on the hook in resolution, writes former CFTC chair
CCPs failing to set effective margin limits – study
Clearers must strike balance between countercyclicality and sensitivity to risk
Swaptions compensation method divides market
US and European firms back redress payments, but disagree over how they would work
LCH, HKEX to clear swaps linked to Asia overnight rates
Clearing houses ready launch of SORA and Honia swaps, but timing is uncertain
EU ‘non-paper’ reveals new effort to delay CCP open access
Negotiations on CCP recovery and resolution could provide a route to postpone Mifid rule
The mysterious disappearance of a Chicago trading giant
Puzzling losses, a closely guarded auction and possible redemption – sources unpick Ronin’s collapse
Procyclicality mitigation for initial margin models with asymmetric volatility
In this paper, we explore the procyclicality of initial margin requirements based on VaR volatility models.We suggest procyclicality can be reduced using a three-regime model rather than using ad hoc tools.
CCPs postpone euro discounting switch to July
Five-week extension agreed after working group proposal for September delay fails to find consensus
CCPs built up liquidity buffers heading into 2020
LCH SA grew qualifying liquid resources 49% year on year
After coronavirus rout, concerns raised about Simm
Annual recalibration means March volatility will not be reflected in margin until end-2021
LCH suffered longest operational outages of top CCPs in 2019
London-based LCH LTD said core systems were down for almost seven hours in 2019
Entering 2020, most CCPs had bigger default funds than a year ago
Majority of back-up funds to handle member defaults saw more pre-funded resources flow in
RBS exits listed derivatives trading and clearing
Clients served eviction notices last week as bank moves to downsize NatWest Markets unit
Asia CCPs forced to hike margins rapidly during equities rout
Margins for Nikkei 225 futures more than doubled at JSCC in a matter of days
ABN winds down Ronin books after Vix losses
$200m loss suffered by bank’s clearing business is thought to be mystery second default
Capital responses, CCP losses and buffer worries
The week on Risk.net, March 14–20, 2020
Coronavirus rout revives attacks on futures margining
FCMs call for permanently higher margins following “unprecedented” number of breaches
Banks rail against China CCPs’ loss-sharing policy
Controversial loss allocation technique remains unused during recent market routs, but banks want it banned
Of rats and men: would member compensation imperil CCPs?
CCPs and members split over whether compensation after default losses is moral hazard or fair
Oil price shock triggers big margin calls
Banks and exchanges worked through weekend in anticipation of oil collapse
Swaps data: cleared volumes drop for all markets – except FX
Smaller CCPs make market share gains in a quarter of double-digit declines for rates and credit