Margin models
Nasdaq exec criticises VAR models in erratic energy markets
FIA Boca 2023: Model being adopted by rivals is “bad choice” for unpredictable assets, says exchange tech official
Soft inflation print triggers initial margin breaches at FICC
Clearing units for MBSs and government securities hit by backtesting deficiencies as coverage levels dip
Clearing house of the year: LCH
Risk Awards 2023: A member default and a spike in UK rates were handled with aplomb, while cleared volumes rose
LCH’s fixed income and IRS units hit by record margin breaches
Peak breaches in Q3 were £924 million and £698 million in size, respectively
Margin for non-cleared European energy trades to jump 80%
Annual recalibration of Simm could catapult some energy firms over relief thresholds
$899m margin breach at FICC’s mortgage unit
Three-day move in TBA prices on June 9 triggered second-highest backtesting deficiency to date
FICC’s government securities unit hit by $995m breach
Large moves in US Treasury yields in June to blame for largest backtesting exception on record
Ice Credit’s required initial margin up 18% in Q2
CCP reported highest level on record, superseding Covid-19-induced peak
CFTC backs banks in tussle over clearing house governance
CME and Ice will need to pay more attention to clearing members on risk committees
Interest rate vol triggered three breaches at CME in Q2
CCP’s interest rate swaps clearing unit reported its first initial margin shortfalls since Q3 2020
JSCC’s bond and IRS units hit by almost 200 breaches
Q2 volatility triggered some of the largest initial margin breaches ever reported by the CCP
Margin costs leap on Simm rejig and rates hikes
Acadia finds roughly one-third jump in exposure following Simm recalibration, with higher funding costs adding to burden
The ghost of Archegos returns to haunt Simm
UK regulator’s attack on Simm may have more to do with the failed family office than meets the eye
PRA’s pot shots threaten Simm’s global ubiquity
UK regulator’s push to improve model governance could tip non-cleared derivatives market into chaos
Commodities threaten pain for initial margins
Market volatility and spot-based Simm approach may drive large margin spikes in little-tested asset class
SwapClear incurs record number of margin breaches
LCH’s interest rate derivatives clearing service reported over 4,000 backtesting exceptions in Q1
BoE: regulators could push CCPs to publish margin shocks
Russia-Ukraine war has forced a tenfold margin funding burden, says BNP; Ice says smaller hedgers face disenfranchisement
Procyclicality of central counterparty margin models: systemic problems need systemic approaches
In this paper the author argues that the focus on initial margin models is misplaced, and the reasons for this are illustrated by empirically testing the performance of standard initial margin models during the March 2020 events.
Back in time: a brief history of LME’s nickel meltdown
As prices went haywire, margin remained frozen and calls to suspend trading were rejected
Collateral resilience is more than just understanding initial margin
New regulations and extreme global events are seeing initial margin (IM) requirements rise in prominence, with investment managers needing to focus on more than just their regulatory and operational compliance
Banks, CCPs protest Esma’s ‘prescriptive’ procyclicality rules
Dealers welcome model transparency push, but call for greater say on methods to combat spikes
Don’t impose blanket margin model rules, say BoE advisers
Focus instead on outcomes and costs and factor in different clearing membership, say Murphy and Vause
At LCH, required IM rose over Q3
Required minimum demanded of clients increased at ForexClear, RepoClear and EquityClear, but fell at SwapClear
EU’s IM model validation rules may put Simm in jeopardy
Draft RTS creates validation hurdles and cross-border conflicts, industry warns