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.
Quantile, TriOptima face off in cleared swaps compression battle
Vendors both unveil new means for clearing members to crunch cleared rate swap notionals
Leaked EU doc could shield legacy swaps from clearing grab
Council paper being debated today sets terms for swaps clearing landgrab
US Treasury hands CCP resolution powers to FDIC
Mnuchin regulatory review explicitly refers to FDIC as receiver under a Title II resolution
Unwanted Kingdom: managing no-deal Brexit risks
UK-based dealers must plan now if they are to handle trades that extend beyond Brexit day
Central counterparty recovery and resolution: the European perspective
This paper contributes to the literature on the recovery and resolution of central counterparties (CCPs) by exploring the key components of the recent European legislative proposal on the recovery and resolution of CCPs, its main differences with the…
Nondefault loss allocation at central counterparties
In this paper, the authors answer three questions about the appropriate allocation of nondefault losses at central counterparties.
Estimating “hedge and auction” liquidation costs in central counterparties: a closeout risk approach
This paper shows how the closeout risk framework can be extended to realistically represent and simulate the potential outcomes of “hedge and auction” default management policies currently implemented by several major central counterparties.
Treasury review not rollback of reforms – CFTC counsel
Trump order is a chance to ease some rules and promote cross-border regulatory deference
Asia clearing surge raises concerns over eligible collateral
Scarcity of high-quality liquid assets gives rise to liquidity risk worries, say banks
SEC delays final decision on DTCC liquidity facility
Regulator says it needs more time to consider market impact of CCLF proposal
Libor’s sunset sees US repo market cast a longer shadow
Concern over structural deficiencies as SOFR chosen to replace key benchmark
Eurex urges more regulators to endorse VM capital savings
CME, Ice and LCH treat variation margin as settlement; Eurex awaits further guidance
Goldman and Federated first to clear MMF repo trades
Money funds cleared over $10 billion of US Treasury repo trades at FICC in June and July
US regulators approve VM route to capital savings
Guidance tips balance in debate over interest payments in settled-to-market swaps
New EU bank rules threaten Eurex, LCH investment policies
CCPs with EU bank licences currently run leverage ratios of less than half the minimum
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.