Margin models
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
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