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.
Clearing houses urge CFTC to act on non-default losses
US clearing members divided on whether NDLs are CCPs’ responsibility or a mutual risk
Lower margin can fuel procyclicality in CCPs – research
Efforts to prevent ‘margin spiral’ during stress could encourage more risk-taking, paper argues
Banks warned on holes in EU’s proposed Brexit relief
Potential EC, French and German no-deal relief is expected to be short-lived and incomplete
CME abandons buy-side direct clearing initiative
CCP shutters plan after feedback from regulators and market participants
The distribution of clearing members’ risk exposure and how it matters
In this paper, the authors compare the data from three major clearing houses concerning tail losses and member concentration.
BlueCrest seeks direct membership at LCH’s SwapClear
Investment firm to make leap away from clearing broker reliance
Brace for more Nasdaq-like losses, HKEx CRO warns
Roland Chai says defaults more likely as global instability increases; CCPs should focus on auction processes
Ice changing margin model for move into options
CCP aims for Q1 2019 roll-out of new Monte Carlo-based methodology as it plans launch of index swaptions
Banks demand greater scrutiny of CCP margin add-ons
Nasdaq Clearing blow-up prompts questions over CCPs’ methods of applying top-ups to concentrated positions
‘Cover 2’ CCP reserve standard inadequate – study
Stress tests underestimate how twin member failure affects clearing house stability
Deutsche largest derivatives bank in 2017
German dealer accounted for 8% of total notionals across 75 largest banks
Clearing houses in Asia to overhaul creaking margin models
Fears of Nasdaq-style failures spur rethink of margining practices at HKEx, JSCC, SGX
SGX to exit swaps clearing business
Decision will leave some contracts without a CCP from next April
Industry fears EU ‘Google tax’ will hit trading venues, CCPs
Broad wording of digital services tax could place market infrastructure in firing line
After Nasdaq, cracks appear in foundation of clearing
Default fund loss triggers debate on risk sharing, auction rules and ‘skin in the game’ at CCPs
The aftershocks of Einar Aas
Energy could be particularly badly affected by the €114m default of Nasdaq power trader Einar Aas
BlackRock, risk models and regulatory relief
The week on Risk.net, October 20–26, 2018
Emir compels clearing surge
Share of cleared interest rate derivatives climbs to 58%
Exchange chiefs back Giancarlo in tussle over CCP oversight
The CFTC may block US CCPs from acceding to EU supervision
Basel to propose IM offset in leverage ratio
Four sources say draft will make concession; it could also revive EU-US segregation drama
Lessons from two commodity defaults
Regulators and exchanges need to learn from the Greenhat/PJM and Norwegian Nasdaq defaults
LCH units bolster liquidity buffers
Cash at central banks and with commercial banks higher in the second quarter
Brexit OTC mutation, chaperones and SA-CCR
The week on Risk.net, October 6–12, 2018