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.
Liquidity risk hits multi-year highs at both CME divisions
Changes to clearing member exposures and portfolio composition drive increases
CFTC’s clearing house recovery rule splits industry
Some fear CCPs will fast-track recovery, others say any rule book will be ignored in emergency
Market ‘not ready’ for US Treasuries clearing mandate
“Client clearing for Treasuries doesn’t really exist,” says Barclays exec, while DTCC points to gaps in market awareness
OCC liquidity risk doubles to all-time high in Q2
Concentration of activity around June expiration responsible for record rise
EU banks ‘will play for time’ in stand-off over India’s CCPs
Lawyers say banks are unlikely to set up subsidiaries and will instead pin hopes on revised Emir fix
Worst-case double default would have caused breach at CME
Stress loss based on hypothetical scenario was $390m higher than prefunded resources
People: Finma CEO quits, Citi’s dealmaking promotion, and more
Latest job changes across the industry
Narrow path to compromise on EU’s post-Brexit clearing rules
Lawmakers unlikely to support industry demand to delete Emir active accounts proposal altogether
At Eurex, default fund grows 45% to record size
Market volatility and current interest rates level behind increase in Q2
Members’ contributions to MBSD’s default fund up 11%
CCP’s skin in the game also up slightly, pushing aggregate amount to highest since Q1 2022
Construction of hypothetical scenarios for central counterparty stress tests using vine copulas
Using the vine copula, the authors put forward a nonparametric means to generate and/or validate hypothetical stress scenarios.
Rate of cleared OTC derivatives rises at European banks
Swedbank leads dealers in secular trend towards clearing space
Mystery clearing member delays ICEU’s CDS transition
But Ice is confident open interest will be close to zero when service shuts down in October
Overboard: ditching clients imperils Treasuries clearing mandate
Standardised docs a drop in the ocean as dealers eye potential costs of sponsored Treasuries clearing
LCH Ltd’s RepoClear margin model gets a makeover
Changes aim to make margin models for gilt repo more sensitive to market moves
Swap Connect growth hampered by unwinding issues
Users’ inability to trade bespoke swaps to unwind positions deters foreign investors
JSCC’s IRS unit hit by record margin breaches
Interest rate volatility drives coverage level below CCP’s risk appetite, triggering IM methodology review
Billions in index CDSs remain at ICEU as clearing shutdown looms
Osttra has migrated 77% of index OI, but the rest is mostly held by clients outside its network
Sovereign bonds top choice for IM collateral
Drive towards higher interest-earning assets strongest at CME and LCH among top CCPs
RepoClear’s default fund halves in Q1
Elevated initial margin allows LCH service to scale back second line of defence to lowest point on record
Ice Credit makes biggest IM call since early pandemic
Aggregate peak calls were 17% higher in Q1 than previous quarter across 25 clearing houses
CCPs shun central banks in liquidity buffers rejig
LCH, Ice US and CME lead the way towards commercial banks
Initial margin hits all-time high at two LCH services
Despite initial margin spike, breaches at SwapClear climb to nearly 19,000
NSCC member received record $42bn cash call in Q1
Largest payment obligation was 22% larger than previous quarter