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.
CCPs added cash to their liquidity buffers in Q1
CME increased cash reserves at central banks by 271% quarter-on-quarter
Leaked doc: EU bans initial margin haircuts to resolve CCPs
Council will ban resolution authorities from dipping into clearing members’ initial margin
LME Clear stretched by CCP stress tests
Metals clearing house would exhaust prefunded resources under Esma’s default shock scenario
Citi’s default fund contributions climbed $2bn in Q1
US bank sees requirement hike 27% quarter-on-quarter
Clearing banks show they’ve learned lessons of the past
CCP members were able to meet massive margin calls in March. But could they do it again?
SA-CCR adoption may spur wider FX swaps clearing
With up to 90% lower exposures on offer, dealers say capital benefits could outweigh margin costs
Fourteen margin breaches at CME’s swap unit in Q1
The peak breach was almost $80 million in size
SwapClear incurred a $558m margin breach in Q1
Liquidity and concentration add-ons covered 41% of mark-to-market exposure
Libor webinar playback: traders hope for liquidity catalysts
Panellists from JP Morgan, Morgan Stanley and Tradeweb discuss "make or break" year for transition
FCMs feared systemic incident during March back-office meltdown
Trade breaks following Covid-19 spike in futures volumes required massive clean-up job, says BofA exec
Central counterparty auction design
The authors analyze the role of auctions in managing the default of a central counterparty’s clearing member.
Eurex’s risk chief on the need for boring models
Banks need stability and predictability of VAR-based margin when volatility spikes, says clearing house CRO
Don’t run CCP auctions by fear, study argues
Paper by BoE economist and co-authors backs ‘second-price’ auctions and limited penalties
Clearing banks feel pinch as rates turn negative
Negative returns on dollar deposits at Eurex, Ice and LCH spur talk of business model change
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.