CCPs

CCP, Securities Lending, Technology, Uncategorized

automation, CCPs, Securities Lending, technology, topstory

Our annual Finadium Investors in Securities Lending conference was rebooted online this year. Finadium subscription clients can access the webinar replay of the Technology, Operations and Market Structure panel here.…

BIS: Model risk at central counterparties: Is skin-in-the-game a game changer?

May 25, 2020

BIS, CCPs, skin in the game

We investigate how central counterparties (CCPs) manage counterparty credit risks. CCPs play a key role in clearing derivative trades. They stand between clearing members, insuring them against counterparty credit risks.…

BIS research says central banks need to assess CCPs jointly in wake COVID-19 turbulence

May 11, 2020

banks, BIS, CCPs, COVID-19

The Covid-19 pandemic led to market turmoil in mid-March. Large price movements prompted large margin calls from central counterparties (CCPs). This strained the liquidity positions of large dealer banks. Banks…

BIS working paper: CCPs may dampen innovation and efficiency in market making

May 4, 2020

BIS, CCPs, dealers, Liquidity, market making

Dealers’ insurance, market structure, and liquidity Many financial markets operate through dealers, market-makers, or similar intermediaries that promote liquidity in over-the-counter (OTC) markets. Following the Great Financial Crisis of 2007-09,…

FSB consults on assessing adequacy of financial resources for CCP resolution

May 4, 2020

CCPs, FSB, resolution plans

The Financial Stability Board (FSB) published a public consultation report on Guidance on financial resources to support CCP resolution and on the treatment of CCP equity in resolution. The guidance…

Risk: Asia CCPs forced to hike margins rapidly during equities rout

March 30, 2020

Asia, CCPs

Asia’s largest clearing houses had to hike margins dramatically during the March coronavirus equities rout, forcing clearing members to meet large intraday margin top-up calls – and vindicating long-held concerns…

Goldman: Barclays, Nordea and more join call to improve safety of CCPs

March 11, 2020

ABN AMRO Clearing, Barclays, Deutsche Bank, Commonwealth Bank of Australia, Franklin Templeton, Guardian Life, Ivy Investments, Nordea, TIAA and UBS have endorsed and joined as signatories a joint buy- and…

Risk: ECB mulls wider clearing house access to account facilities

March 4, 2020

CCPs, Central Banks, risk

The European Central Bank (ECB) is considering whether to provide eurozone clearing houses with access to its account facilities without a banking licence, according to Fiona van Echelpoel, deputy director-general…

CCP12 calls for harmonized reporting of collateral for uncleared derivatives

February 13, 2020

CCP12, CCPs, collateral management, UMR

Progress and Initiatives in OTC Derivatives CCP12 February 2020 This report builds on top the 2019 report ‘Incentives for Central Clearing and the Evolution of OTC Derivatives’ in order to…

Higher swaps margin costs + lower RWA for CCPs = more securities finance volumes (Premium)

February 6, 2020

CCP, Derivatives, Securities Lending, Total Return Futures, Total Return Swaps

CCPs, DTCC, Eurex, securities finance, topstory, Total Return Futures, Total Return Swaps

In the most positive turn of events for securities finance in some time, there is reason to think that the next few years should see a nice uptick in volumes…

SEC approves new OCC capital management policy

January 29, 2020

capital management, CCPs, OCC, sec

OCC, the world’s largest equity derivatives clearing organization, announced that it received regulatory approval of its new capital management policy by the U.S. Securities and Exchange Commission (SEC). “We appreciate…

FSB 2019 resolution report focuses on CCP resilience

November 14, 2019

CCPs, FSB, Resolution

The Financial Stability Board (FSB) today published its 2019 Resolution Report. The report provides an update on progress in implementing policy measures to enhance the resolvability of systemically important financial…

Major banks and asset managers propose CCP resilience, recovery and resolution standards

October 25, 2019

CCPs, Cover 2, resilience

A Path Forward for CCP Resilience, Recovery, and Resolution October 24, 2019 The Principles for Financial Market Infrastructures (PFMIs) that were agreed upon by global standards-setting bodies in 2012 and…

Asset manager thinking on counterparty default indemnification including CCPs (Premium)

September 24, 2019

CCP, Securities Lending

asset managers, CCPs, Indemnification, Securities Lending, topstory

In Finadium’s 2019 survey of asset managers in securities lending, we asked about the value of counterparty default indemnification including would managers seek indemnification if the borrower was legally a…

Help wanted: buy-side firm seeks CCP business model for securities lending

September 5, 2019

Rajen Sheth

CCP, Securities Lending, Technology

Beneficial Owners, buy-side, CCP Gateway, CCPs, Pirum, Securities Lending, topstory

CCPs for the buy-side in securities finance, long thought of as an elusive unicorn, are now coming to fruition in what may be the most important change to the industry…

ESMA critiques European regulatory oversight of CCPs

July 22, 2019

CCPs, ESMA, Repo

The European Securities and Markets Authority (ESMA) has today published its annual peer review report on the overall supervision of EU Central Counterparties (CCPs) by National Competent Authorities (NCAs). The…

CPMI and IOSCO publish for public comment a paper on CCP auctions

June 6, 2019

CCPs, CPMI, IOSCO

The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) today published for public comment A discussion paper on central counterparty default management auctions.…

LCH: Best Practices in CCP Risk Management

June 4, 2019

CCPs, LCH, risk management

Clearing houses play a systemically important and central role in Financial Market Infrastructure. As they come under increasing scrutiny from members, clients, and regulators, it is important that central counterparties…

FSB report on market fragmentation scrutinizes CCPs, data, cyber and crypto

June 4, 2019

News and Notes – Fintech

CCPs, central clearing, cryptoassets, cyber, cybersecurity, data management, FSB, market fragmentation

The Financial Stability Board has released a report on market fragmentation, which was delivered to G20 Finance Ministers and Central Bank Governors ahead of their meetings in Fukuoka on 8-9…

Bank of England working paper: The Cost of Clearing Fragmentation

May 31, 2019

Staff Working Paper No. 800 By Evangelos Benos, Wenqian Huang, Albert Menkveld and Michalis Vasios Fragmenting clearing across multiple central counter-parties (CCPs) is costly. This is because dealers providing liquidity…

Bank of England blog: CCP porting, are there lessons to be learnt from elsewhere?

May 28, 2019

Bank of England, CCP porting, CCPs, OTC derivatives

Post-crisis regulatory reforms have reshaped and increased the amount of clearing activity in the OTC derivatives market. An emerging issue is so-called “client porting” – i.e. how central counterparties (CCPs)…

CFTC Staff Issues Clearinghouse Supervisory Stress Test Report

May 1, 2019

CCPs, CFTC, CME, LCH

The Commodity Futures Trading Commission’s (CFTC) Division of Clearing and Risk (DCR) and the Office of the Chief Economist (OCE) today issued, CCP Supervisory Stress Tests: Reverse Stress Test and…

Three ways to jump-start securities finance volumes (Premium)

April 10, 2019

CCP, Derivatives, Securities Lending

CCPs, securities finance, topstory, Total Return Futures, Total Return Swaps

Securities finance volumes are in the doldrums after a robust Q1-Q3 2018, leaving some market participants wondering when revenues will return. Solutions are around the corner however, and can reasonably…

Paper: who pays and who gains from CCP services?

March 13, 2019

Who pays? Who gains? Central counterparty resource provision in the post-Pittsburgh world Fernando Cerezetti(1), Jorge Cruz Lopez(2), Mark Manning(3) and David Murphy(4) At the Pittsburgh Summit in 2009, G20 leaders…

An argument that more PB internalization will lead to more direct securities lending (Premium)

March 5, 2019

CCP, Hedge Funds, Securities Lending

Beneficial Owners, CCPs, direct lending, hedge funds, Securities Lending, topstory

If prime brokers continue to internalize more effectively, plus expand further into synthetics, there is an argument to be made that more beneficial owners will actively consider direct securities lending…

Paper: Counterparty Risk and the Establishment of the New York Stock Exchange Clearinghouse

March 2, 2019

CCPs, counterparty risk, NYSE

Asaf Bernstein University of Colorado at Boulder Eric Hughson Claremont McKenna College Marc Weidenmier Chapman University and National Bureau of Economic Research We examine the effect of the establishment of…

ECB’s Cœuré makes the case for CCP oversight

March 1, 2019

CCPs, ECB

Introductory remarks by Benoît Cœuré, Member of the Executive Board of the ECB, at a conference on CCP risk management organised by the Deutsche Bundesbank, the ECB and the Federal…

ESMA supervision to focus on data, Brexit and cybersecurity in 2019

February 19, 2019

News and Notes – Fintech

CCPs, credit rating agencies, CSDs, cybersecurity, data management, ESMA, Trade repositories

The European Securities and Markets Authority (ESMA) has published its 2019 Supervision Work Programme, which details the main areas of focus for the upcoming year for ESMA’s supervision of Trade Repositories (TRs),…

BIS Working Paper: Central counterparty capitalization and misaligned incentives

February 12, 2019

BIS, capitalization, CCPs, skin in the game

Wenqian Huang 11 February 2019 PDF full text This paper investigates for-profit central counterparties (CCPs), asking whether their incentives might undermine financial stability. Such CCPs choose how much capital to…

ISDA Publishes Best Practice Recommendations for CCPs

January 24, 2019

CCPs, ISDA, risk management

The International Swaps and Derivatives Association, Inc. (ISDA) has published a set of best practices for central counterparties (CCPs), aimed at ensuring greater consistency in risk practices at CCPs across…

Five predictions for securities lending for 2019 (Premium)

January 14, 2019

CCP, Derivatives, Securities Lending

CCPs, Securities Lending, SFTR, topstory, Total Return Futures, Total Return Swaps

2018 was a good year for securities lending both financially and in the evolution of the business. 2019 promises to offer more interesting times. We offer our predictions for market…

European Commission adopts conditional equivalence for CCPs and CSDs post-Brexit

December 19, 2018

Bank of England, Brexit, CCPs, CSDs, European Commission

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE…

BIS: Clearing risks in OTC derivatives markets: the CCP-bank nexus

December 17, 2018

BIS, CCPs, systemic risk

Systemically important banks and central counterparties (CCPs) interact in highly concentrated over-the-counter (OTC) derivatives markets. We outline the CCP-bank nexus to think about the endogenous interactions between banks and CCPs…

The buzz on Total Return Futures (Premium)

December 13, 2018

CCP, Derivatives, Total Return Futures, Total Return Swaps

CCPs, CME, Eurex, Euronext, securities finance, topstory, Total Return Futures, Total Return Swaps

The markets are starting to talk more about Total Return Futures (TRF) as a realistic alternative to Total Return Swaps (TRS), which themselves are competition for securities finance products. TRFs…

Reuters: EU takes new step on derivative clearing, despite UK, U.S. concerns

December 3, 2018

CCPs, equivalency, Europe, Reuters

BRUSSELS (Reuters) – European Union governments backed on Monday a proposal that could force systemic foreign clearing houses with operations in the EU to relocate to the bloc if they…

Which money fund will be first to force price improvement on repo CCPs? (Premium)

November 20, 2018

CCP, cleared repo, Repo

buy-side, CCPs, cleared repo, Eurex, FICC, investments, Repo, topstory

Cleared repo is growing but rates remain about the same as in the bilateral market. How long will money funds accept this status quo? Or, how long can big cash…

Global regulatory committees say CCP adoption working but concentration of clearing firms is high

November 19, 2018

CCPs, CPMI, FSB

The Financial Stability Board (FSB), the Basel Committee on Banking Supervision (BCBS), the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published today…

ECB exec on the 3C’s of payment dangers: cryptos, cyber and CCPs

November 16, 2018

News and Notes – Fintech

Benoît Cœuré, CCPs, Central Banks, cryptocurrencies, cybersecurity

Excerpts from speech by Benoît Cœuré, chair of the Committee on Payments and Market Infrastructures (CPMI) and member of the Executive Board of the European Central Bank, at the Economics…

FSB consults on whether existing financial resources are enough for CCP resolution

November 15, 2018

CCPs, Financial Stability Board, FSB

Financial resources to support CCP resolution and the treatment of CCP equity in resolution Available as: PDF 15 November 2018 This discussion paper seeks comment on financial resources to support…

Finadium Big Ideas Quarterly Q4 2018 now online

November 7, 2018

CCP, LIBOR, Securities Lending

agency lending, CCPs, SOFR, topstory

Our quarterly presentation on research, news and events. Finadium Securities Finance, Collateral and Derivatives subscription clients can log in and download the presentation here. If you are already logged in,…

Will the need for scale plus CCLF mean US repo dealer consolidation? (Premium)

November 6, 2018

CCP, Liquidity Management, Repo

CCLF, CCPs, dealers, FICC, PFMI, Rates & Repo 2018, Repo, topstory

At our Rates & Repo 2018 conference, the Capped Contingency Liquidity Facility (CCLF) was a hot topic. Maybe too hot. We’re seeing a potential driver for market consolidation. Continue reading

FT: EU pledges access to UK clearing houses in no-deal Brexit

October 30, 2018

Brexit, CCPs, EU, FT

Brussels has responded to financial industry calls for continued access to London’s capital markets by providing reassurance that EU groups will temporarily be able to use crucial derivatives clearing services…

Reuters: EU shows no sign of heeding U.S. threat over derivatives clearing

October 29, 2018

CCPs, ECB, European Union

The European Union is proposing to give the European Central Bank sweeping powers over foreign clearing houses in times of market stress, an EU document showed, as the bloc shows…

Bank of England publishes plans for financial services regulation post-Brexit

October 25, 2018

Bank of England, Brexit, CCPs

The package of communications published today sets out changes to our rules and binding technical standards arising out of EU Withdrawal. It also sets out further guidance on the process…

Reuters: UK derivatives clearers may get no-Brexit deal reprieve – EU document

October 25, 2018

Brexit, CCPs, Clearing

The European Union might grant temporary permission for clearing houses in Britain to continue serving EU customers if there is a no-deal Brexit next March, an EU document seen by…

London Stock Exchange Group to increase majority shareholding in LCH Group

October 22, 2018

CCPs, LCH, LSEG

London Stock Exchange Group plc (“LSEG”) announces that it is in the process of acquiring further shares in LCH Group Holdings Limited (“LCH”), which will increase its majority ownership of…

CFTC Commissioner Rostin Behnam on CCP risk management

October 21, 2018

Behnam, CCPs, CFTC

Keynote Remarks of CFTC Commissioner Rostin Behnam at the Federal Reserve Bank of Chicago’s Fifth Annual Conference on CCP Risk Management, Chicago, Illinois CCP Governance and Risk Management CCP governance…

ESMA values EU derivatives market at EU 660 trillion with central clearing increasing significantly

October 20, 2018

CCPs, derivatives, ESMA

The European Securities and Markets Authority (ESMA) today publishes its first Annual Statistical Report (Report) on the European Union’s (EU) derivatives markets. The Report, based on data submitted under the…

ESMA’s Maijoor highlights risks of no UK CCP recognition under Brexit

October 4, 2018

Brexit, CCPs, ESMA

The state of implementation of MIFID II and preparing for Brexit WFE Annual Meeting 2018 – Hotel Grande Bretagne, Athens, Greece Steven Maijoor Chair European Securities and Markets Authority The…

FIA: Mapping Clearing Interdependencies and Systemic Risk

October 2, 2018

CCPs, Clearing, network theory