Global exchanges and trading firms strongly recommend Basel Leverage Ratio SA-CCR for exchange-traded derivatives

We, ABN AMRO Clearing Bank (AACB), Akuna Capital, Atlantic Trading London, Barak Capital, BATS Global Markets, BOX Options Exchange, Chicago Board Options Exchange (CBOE), CSS, DRW, Eurex, Eurex Clearing, Financial Market Engineering (FME), Flow Traders, Geneva Ireland Financial Trading, IMC Trading, Intercontinental Exchange (ICE), Jane Street Financial, Liquid Capital Markets, Mako Global Derivatives Partnership, Maven Derivatives, NASDAQ, The Options Clearing Corporation (OCC), Optiver, Osaka Exchange, OSTC, Quantlab Financial, Ronin, RSJ, Spire Europe, Sun Trading, TOM MTF, Tyler Capital Partners, Virtu Financial and Volant Trading have taken note of the Consultative Document on Revisions to the Basel III Leverage Ratio (LR) Framework. We strongly welcome the proposed revisions in the document and are writing to you in order to re-emphasise the position we communicated in our letter dated 27 October 2015. This consultation response aims to provide additional background and data to reiterate our concerns.
We continue to believe that unless the Standardised Approach for Counterparty Credit Risk (SA-CCR) method is allowed as a replacement for the Current Exposure Method (CEM) in the leverage calculation for exchange-traded derivative (ETD) exposures, the application of the LR will result in vastly increased capital requirements for general clearing members (GCM) offering clearing services to market makers and liquidity providers. This will fundamentally threaten their business models and impact the liquidity and stability of global financial markets. We believe this would be contrary to the G20 commitments on central clearing.
We thank the Basel Committee on Banking Supervision (BCBS) for their efforts in reconsidering the application of the CEM methodology. This will allow us to work towards an appropriately calibrated and sustainable leverage ratio framework without creating serious economic disincentives for participants in the ETD market. The proposed revisions and the introduction of a modified version of SA-CCR would dramatically reduce the unintended consequences we currently face based on CEM.
Furthermore, we strongly support broader industry concerns related to the limitations of segregated client-related margin offset and the recognition of their exposure reducing effects, as expressed for by – amongst others -– the Futures Industry Association (FIA) and CCP12.
The full comment letter is available at

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