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.
VM change helps Barclays cut derivatives by $113bn
Three factors slashed size of book by 25%, including move to treat margin as settlement
Mixed motives threaten messy outcome in euro clearing row
Stability, oversight, Parisian ambition, repo haircuts: LCH is under attack from all sides
Dislocation policy: LCH exodus risks CCP basis blow-out
Questions about post-Brexit status of UK CCP could spark mass migration – and severe volatility
CCP stress testing gets real
Quants propose technique to generate effective, plausible CCP stress-testing scenarios
LCH users weigh early exit as fears grow of EU ban
Two CCPs report interest from LCH customers; banks expect first book transfers in early 2018
Extremely (un)likely: a plausibility approach to stress testing
CCP’s risk managers propose a framework for generating extreme but plausible stress scenarios
Bailout obsession holds back US CCP resolution regime
Dodd-Frank leaves legal uncertainty, but proposed alternatives could be even worse
Repeal CEM; reform SA-CCR
Capital framework hurts clearing resilience, Citi execs argue
A balanced approach to central counterparty margining
This paper is meant to serve as a comparison of the approaches and margin models employed by CCPs.
Managing market liquidity risk in central counterparties
This paper discusses the different approaches to incorporating market liquidity risk within a CCP’s default waterfall and the challenges that these approaches pose.
Initial margin model sensitivity analysis and volatility estimation
This paper presents a new approach to parameter selection based on the statistical properties of the worst loss over a margin period of risk estimated by the margin model under scrutiny.
Performance testing of margin models using time series similarity
This paper proposes a performance test based on empirical similarity that would account for margin shortfall, procyclicality and efficiency in a single score.
Cleared margin setting at selected central counterparties
In this paper, the authors address one aspect of CCP risk management: initial margining practices. The paper provides a historical review of margining at selected CCPs as well as an overview of their current margin policies.
Twin member default would hit up to 23 CCPs
New FSB analysis reveals interdependencies of clearing system
BoE warns of potential disruption to clearing business for EU firms
Fragmentation of market-based finance could raise costs and risk for EU and UK companies
Fed weighing VM capital cut for cleared swaps
Powell implies support for practice that saved UBS $300m in capital
LCH limits substitution to tackle quarterly collateral flight
CCP clamps down on bond-for-cash switches driven by reporting and quarter-end repo spikes
ECB requests powers to regulate CCPs
Brexit heightens concern over importance of central counterparties
US dealers wade into European CCP relocation debate
CFTC hearing warns of increased margining costs and a pre-Brexit client onboarding crunch
CME to pass on Ice CDS administration charges
Clearing house to hike CDS index trade fees from July after Ice’s determinations committee takeover
DTCC’s $74 billion liquidity charge riles members
Some firms may stop clearing US Treasury trades if the CCLF is implemented
ECB and Esma would call shots on euro clearing
Proposals give central bank and regulator the power to bar biggest third-country CCPs
Is it $5bn or $77bn? Data enters the euro clearing row
Eurex set to challenge LCH estimates of clearing relocation costs
EU rules delay sparks fears over indirect clearing
CCP members must offer new arrangements for exchange-traded derivatives in January 2018