Margin models
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
CME delays Span 2 rollout till at least mid-2022
FCMs ask bourse to postpone long-planned switch to new VAR model to allow more time for testing
UMR efficiency: optimising systems and processes for IM compliance
UMR are among the biggest collateral management issues faced by investors in over-the-counter (OTC) derivatives. At a specially convened session sponsored by IHS Markit at Risk.net’s Buy-Side Risk Global event, panellists discussed the latest phases of…
FICC calls for rehypothecation relief to scale US Treasuries clearing
Current prohibition on margin re-use penalises sponsored clearing of cash instruments
Procyclicality control in risk-based margin models
This paper revisits the procyclicality issue in risk-based margin models and provides additional insight on procyclicality mitigation techniques.
CME targets year-end rollout of new margin model
Clearing house testing new Span 2 framework with members, more work needed with vendors
JSCC issued $2.8bn VM call on a clearing member in Q1
The call was for a participant in the CCP’s clearing services that cover IRS, CDS and exchange-traded financial products
Delays to IM model approvals causing ‘anxiety’ for MetLife
Isda AGM: US insurer says regulators unprepared to accept docs where model approval is obligatory
Credit Suisse and the Wild West of synthetic prime brokerage
Industry insiders describe a frontier business with few rules – and plenty of questionable practices
JSCC incurred 311 IM breaches in 2020
IRS service experienced the largest breach last year
LCH SA skin in the game fell in Q4
In contrast, pre-funded clearing member contributions to the default funds increased 10% to €6.1 billion
One FICC member paid record $102bn to cover dues in Q4
Previous highest payment obligation of a single participant was $77 billion in size
Initial margin at Ice CCPs surged over 2020
Required IM at Ice Clear US increased 42% year on year
IM at LCH Ltd fell to post-Covid low in Q4
Required IM for SwapClear dropped to £149.5 billion, down 3% quarter on quarter
Initial margin at the OCC topped $100bn in Q4
Exchange-traded derivatives hub cleared 7.5 billion contracts in 2020
Margin breaches quadrupled at Eurex in 2020
Equity derivatives service witnessed 1,782 breaches last year alone
Hero or villain? NSCC draws fire for Robinhood margin waiver
Fears of moral hazard after CCP waives billions in margin demands following meme-stock volatility
EU’s initial margin relief may come too late for phase five
Long-awaited easing of model governance requirements unlikely to take effect by September
CFTC urged to take lead on CCP margin models
Advisory committee unable to agree steps on margin period of risk, model transparency
Derivatives client clearer of the year: JP Morgan
Risk Awards 2021: bank avoided tech snags and margin call surprises that plagued peers during crisis