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.
Buy-side battle
Central clearing has dominated the agenda of credit derivatives dealers this year. With regulators pushing for buy-side firms to have access to clearing platforms, dealers and clearing houses are finding there is a great deal of work still to be done…
Industry responds to EC derivatives proposals
Three industry bodies have offered overall support for the European Commission's proposals for derivatives markets, but opposed measures they claim could be detrimental to over-the-counter trading.
A state of flux
Efforts to improve the risk architecture for the derivatives business in Asia appear more muted than elsewhere, with many regulators in the region taking a wait-and-see approach towards central counterparty. But, as Duncan Wood reports, there are some…
Get connected
Regulatory demands for the derivatives industry to improve operational efficiency have become increasingly stringent in the past year. To meet the targets, dealers say interoperability between technology platforms is vital. But in the competitive vendor…
The bespoke conundrum
The dealer community has pushed towards standardisation of credit default swaps contracts, enabling them to meet a regulatory goal of ensuring a large chunk of the credit derivatives market is cleared through central counterparties. What implications…
Banks repay $68bn in Tarp funds to US Treasury
Ten of the largest US financial institutions that have received public funds under the Troubled Assets Relief Program (Tarp) scheme are to pay back $68 billion after they were approved to reimburse the funds to the federal government yesterday.
The push to CCP
Feature
US to regulate OTC derivatives
Daily news headlines
Japanese exchanges move to set up CCPs next year
Risk mitigation systems for over-the-counter derivatives set to go live in 2010
Piloting policy
The privately negotiated derivatives industry congregated in Beijing last month for the International Swaps and Derivatives Association's annual general meeting. Top of the agenda were efforts to formulate a strategic response to calls for more…
Fed approval leaves Ice/TCC on brink of CDS clearing
Intercontinental Exchange's (Ice) application to become a member of the Federal Reserve System has been approved by the US central bank, overcoming one of the final obstacles preventing the firm from launching its central clearing platform for credit…
Portal combat
The first central clearing houses for credit default swaps were expected to start business in December, but regulatory hold-ups delayed the launch in the US and are also causing issues in Europe. Although four ventures are planned, some dealers expect…
Breath of Liffe
Amid fierce competition and regulatory scrutiny, the combined initiative by derivatives exchange Liffe and clearing house LCH.Clearnet for clearing credit default swaps was launched on December 22. Will the two companies have a first-mover advantage? By…