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.
CME preps April Eurodollar conversion
US exchange selects April 14, 2023 to flip open interest in heavily traded Libor contracts to SOFR
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
LME member default fund contribution jumps 89%
Following record-breaking margin breach in Q1, the CCP plumped up its line of defence
Choice of margin period of risk and netting for computing margins in central counterparty clearinghouses: a Monte Carlo investigation
The authors provide a quantitative comparison for evaluating the impact of collecting margins in a gross-versus-net system with the margin period of risk (MPOR) set to between one and five days.
Esma warns new foreign clearing house rules could backfire
Löber says euro swaps trading may move away from CCPs that face toughest EU scrutiny
‘Very little support’ for a US Treasury clearing mandate – Isda
Dealers and clients prefer carrot to stick in efforts to improve Treasury market liquidity
LCH mulls FX spot clearing as buy-side demand grows
Anticipated ForexClear service could reduce funds’ reliance on prime broker credit lines
Share of required margin increases at top EU CCP members
Number of clearing members with total requirements of €10bn and above has been increasing since 2017
Options expiry triggered $135m liquidity shortfall at NSCC
The CCP collected supplemental liquidity deposits six times during the first quarter
Initial margin at Ice Europe up 15% over Q1
IM held against F&O positions hit all-time high, as number of margin breaches nudged higher
Eurex’s fixed income and IRS units hit by almost 700 breaches
Peak breaches in Q1 were €706 million and €214 million in size, respectively
JSCC swap surge triggers plea to rethink US client ban
With over two-thirds of yen RFR swaps volumes going to JSCC, calls grow for CFTC to ease clearing restrictions
Nickel debacle weakens UK’s case on clearing supervision
LME episode comes amid scrutiny of UK regime and fresh Brexit row
Liquidity risk down 34% at the OCC
Projected largest payment obligation set at $6.2 billion for Q1
SwapClear incurs record number of margin breaches
LCH’s interest rate derivatives clearing service reported over 4,000 backtesting exceptions in Q1
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.
Exchange execs clash over LME nickel closure
Ice’s Williams says circuit breakers could have averted shutdown, but LME’s Combe defends ‘tough decision’
LME tear-up may have averted ‘multiple defaults’ – CEO
Decision to cancel nickel trades on March 8 forestalled ‘unprecedented’ margin call, argues exchange chief
Late EU clearing house recognition spooks dealers
Bank capital requirements on exposures to affected foreign CCPs could jump after June 28 deadline
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
Nickel price chaos triggered $2bn margin breach at LME
The CCP reported its largest breach ever in March, as commodities prices went wild
FTX proposal prompts calls for CFTC rules review
Current bankruptcy and margin ring-fencing rules are incompatible with direct clearing, FIA says
FTX’s ‘easy-access’ clearing stokes fears over runaway risk
Crypto exchange will auto-liquidate underwater positions, which critics say could fuel a death spiral in prices
Eurex wants regulators to do more to kick-start EU clearing
Around half the end-user accounts opened at the CCP after Brexit remain dormant