Skin-in-game
Thin-skinned: are CCPs skimping on capital cover?
Growth of default funds calls into question clearers’ skin in the game
CME member contributions up 11%
Default fund for F&O clearing unit hits record size driving CCP’s skin-in-the game share to all-time low
LCH SA’s default funds hit record highs
CCP’s own contributions account for less than 1% across three clearing services
OCC skin in the game down by nearly a third
Hike in capital expenditures and tax payments drives decrease
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
At Eurex, default fund grows 45% to record size
Market volatility and current interest rates level behind increase in Q2
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
CCPs unlikely to be wiped out by op losses, research suggests
Former LCH risk chief says sharing loss data would help CCPs avoid risk of holding too little capital, or too much
LCH, JP Morgan question BoE’s CCP resolution powers
Isda AGM: UK proposals give central bank broad powers to intervene in winding up stricken clearers
CFTC urged to take lead on CCP margin models
Advisory committee unable to agree steps on margin period of risk, model transparency
Skin in the game of top CCPs varies
The average default fund has less than 4% of total resources contributed by the host CCP itself
JSCC increases skin in the game after merger
CCP added ¥2.4 billion to cover commodities contracts
EU hands CCP members a narrow win on skin in the game
Clearing members could use the final rules to push for higher CCP capital globally
Citi’s default fund contributions climbed $2bn in Q1
US bank sees requirement hike 27% quarter-on-quarter
IM calls rocket at LCH’s repo service in Q3
Peak aggregate initial margin call of €462 million in third quarter
Ice adds insurance to default waterfall
Protection promises partial recovery of guarantee funds at three CCPs
CCPs dismiss bank, buy-side criticisms
CME, Ice bat away suggestions of flaws in clearing house risk management
After Nasdaq, cracks appear in foundation of clearing
Default fund loss triggers debate on risk sharing, auction rules and ‘skin in the game’ at CCPs
Risk.net podcast: OCC’s Fennell on Nasdaq breach, crypto and ‘skin in the game’
Clearing house is “seriously considering” contributing to own default waterfall
Skin in the game
This paper analyzes the cost of putting aside capital as skin in the game (SITG).
Spotlight on auction in €114m Nasdaq clearing blow-up
Four-member auction may have turned 39% margin breach into huge default fund loss