CCPs

CCPs, OCC

In the midst of record cleared contract volume, OCC, the world’s largest equity derivatives clearing organization, today released a paper titled, Optimizing Incentives, Resilience and Stability in Central Counterparty Clearing,…

European Commission grants 18 month equivalence to UK CCPs

September 22, 2020

Brexit, CCPs, European Commission

The European Commission yesterday adopted a time-limited decision to give financial market participants 18 months to reduce their exposure to UK central counterparties (CCPs). A CCP is an entity that…

Finadium: Planning for Securities Finance After COVID-19

September 15, 2020

Basel III, CCP, Corporate governance, Securities Lending

Basel IV, Best Execution, CCPs, corporate governance, distributed ledger technology, securities finance, topstory

A new Finadium report delivers a core review of some of the most important trends facing the securities finance industry for a scenario analysis of potential outcomes. Continue reading

EACH: European CCPs prove resilience after BCP fire drill tests

September 9, 2020

CCPs, EACH, stress tests

During the second quarter of 2020, 16 European CCPs Members of the European Association of CCP Clearing Houses (EACH) successfully performed Fire Drill Tests in Business Continuity Planning (BCP) mode.…

EU agrees on higher skin in the game for CCPs

August 19, 2020

CCPs, Europe

From ISDA Daily Lead: EU legislators have reached an agreement on the rules and procedures for resolving a central counterparty in crisis that includes increasing the amount of skin in…

European Association of CCP Clearing Houses (EACH) pushes back on clearing member compensation guidance

July 31, 2020

CCPs, EACH, Europe

The European Association of CCP Clearing Houses (EACH) welcomes the opportunity to respond to the FSB consultative document “Guidance on financial resources to support CCP resolution and on the treatment…

The CCP argument for collateral standardization and sponsored clearing post-COVID-19 (Premium)

July 28, 2020

CCP, Collateral Management, Repo

CCPs, collateral management, LCH, Repo, topstory

On a recent ICMA podcast, James Upton, Commercial Services Director at LCH and co-chair of the ERCC Operations Group, made the case for the use of CCPs to standardize collateral…

Secfinance in H2: J.P. Morgan’s George Rennick on market themes and participant impacts (Premium)

July 22, 2020

Securities Finance, Collateral and Derivatives, Securities Lending

'40 Act funds, agency lending, CCPs, Central Banks, J.P. Morgan, RWA, sovereign wealth funds, topstory

As the pandemic hit markets in H1, participants’ focus heightened on the extra due diligence required for risk management, client communication, and discipline and controls, while capital preservation was prioritized…

ISDA: CCP Initial Margin up 51.9% for Q1 2020

July 15, 2020

CCPs, ISDA, Margin

During the first quarter of 2020, there was a significant increase in initial margin (IM) collected by global central counterparties (CCPs) for over-the-counter (OTC) derivatives and exchange-traded derivatives (ETD). The…

ESMA’s CCP stress tests confirm system resilience, warn on concentration risk

July 14, 2020

CCPs, ESMA, stress tests

The European Securities and Markets Authority published the results of its third stress test exercise regarding Central Counterparties (CCPs) in the European Union (EU), which confirm the overall resilience of…

HEC Paris: The Value of Central Clearing

July 7, 2020

Guillaume Vuillemey, HEC Paris and CEPR I study a contracting innovation that suddenly insulated traders of hedging contracts against counterparty risk: central clearing counterparties (CCPs) for derivatives. The first CCP…

CPMI and IOSCO issue paper on CCP default management auctions with three categories for follow up

June 25, 2020

auctions, CCPs, CPMI, defaults, IOSCO

CPMI and IOSCO are today publishing an updated document entitled “Central counterparty default management auctions – Issues for consideration”. The purpose of this document is to provide a more complete…

EU authorities reach political agreement on CCP recovery and resolution

June 25, 2020

CCPs, Europe

The EU is stepping up its rules to make clearing houses safer and address systemic risk that could arise from their potential failure. The Presidency of the Council and the…

Analysis of Darrell Duffie’s paper on centralized clearing of US Treasuries (Premium)

June 9, 2020

CCP, cleared repo, Fixed Income, Market infrastructure, Repo

CCPs, Darrell Duffie, topstory, US Treasuries

Stanford Professor Darrell Duffie released a paper last month through the Brookings Institution discussing centralized clearing of US Treasuries. He organizes the arguments about how and why clearing should move…

Webinar replay: Technology, Operations and Market Structure in Securities Finance, FISL 2020 (Premium)

May 28, 2020

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