The World Federation of Exchanges (WFE) has pushed back against recent Bank of England (BoE) proposals requiring UK central clearing counterparties (CCPs) to increase disclosure of their margin models. The proposals aim to make it easier for clearing members (and their clients) to replicate and better predict CCP margin calls. We think more transparency could improve capital allocation and collateral optimization. It would help clearing members and clients to predict the need for more margin during stress events, avoiding forced liquidation of assets and the kind of fire sales seen in the 2020 ‘dash for cash’ and 2022 UK gilt crisis. However, there are some downsides and the potential for unintended consequences.
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