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.
CCP discounting big bang: convexity adjustment
The collateral transition to SOFR will create convexity adjustments that need to be modelled
Accounting rules snare insurers in SOFR discounting switch
Re-couponing swaps to reduce discount risk could have adverse accounting consequences for insurers
EU CCPs expand overseas footprint
Thirteen per cent of EU CCP clearing members are from outside the EU
Banks’ cross-border exposures to shadow banks surged in Q1
Liabilities to NBFIs increased three times more than usual over Q1 2020
SOFR discounting: CCPs prepare for make or break auctions
Deluge of one-way risk and kinks in basis swap auctions could derail Libor transition milestone
Imperfect balance? Clearers weigh EU’s CCP resolution tools
Potential levels of loss mutualisation under EU rules are unnerving some clearing members
Stablecoins, term Sonia and skin in the game
The week on Risk.net, August 15-21, 2020
Goldman signs up as NDF client clearer at LCH
US bank expecting jump in cleared trades when initial margin rules hit buy side
EU hands CCP members a narrow win on skin in the game
Clearing members could use the final rules to push for higher CCP capital globally
Indonesia eyes netting changes to enable derivatives CCP
Central bank says legal amendments will pave way for locally cleared NDFs and interest rate swaps
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