CCPs

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

Benchmarks, CCP, 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

Global regulators are becoming increasingly aware of the importance of market infrastructures in the systemic risk topography. In particular, regulators are recognizing the need to understand the interconnections between clearinghouses…

CFTC Chairman Giancarlo Releases Cross-Border White Paper

October 1, 2018

CCPs, CFTC, OTC derivatives

Washington, DC – Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo released a white paper titled “Cross-Border Swaps Regulation Version 2.0: A Risk-Based Approach with Deference to Comparable Non-U.S.…

Finadium: CCPs, Liquidity and Regulatory Disputes on Systemic Risk

August 9, 2018

CCP, Regulatory

CCPs, Liquidity, PFMI, Regulation, topstory

Why are regulators trying to oversee central counterparties (CCPs) outside their borders, and why are they making hostile speeches against one other? What is equivalence? How are CCPs meeting the…

ESMA publishes final report on EMIR anti-procyclicality margin measures for CCPs

May 29, 2018

News and Notes, Uncategorized

CCPs, EMIR, ESMA

EMIR recognizes that CCPs, competent authorities and ESMA should adopt measures to prevent and control possible procyclical effects arising from the risk-management practices adopted by CCPs. To this end, Article…

CCPs lag on risk management and recovery planning despite progress

May 3, 2018

News and Notes, Uncategorized

CCPs, CPMI-IOSCO, recovery, risk management

The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a report, entitled Implementation monitoring of PFMI: follow-up Level 3 assessment of CCPs’ recovery…

BoE greenlights incident reporting requirement for UK CCPs after industry feedback

May 2, 2018

News and Notes, News and Notes – Fintech

Bank of England, CCPs, IT

In February 2018, the Bank of England issued a consultation paper on a proposed new rule relating to incident reporting for UK central counterparties (CCPs). The proposed new rule formalizes the…

With Deutsche Bank shrinking its balance sheet, who picks up the slack? (Premium)

May 1, 2018

CCP, Prime Brokerage

CCPs, Deutsche Bank, peer to peer, Prime Brokerage, topstory

Deutsche Bank announced plans last week to reduce the size of its global prime brokerage business with a focus on the US, as well as US rates trading. This will…

Competition in collateral trading notes, structured products and collateral packaged substitutes (Premium)

April 16, 2018

CCP, Collateral Management, Investments, Securitization

CCPs, CME, collateral trading notes, GCSA Capital, Invesco, K-Notes, structured products, topstory

We’re catching up on a few things following the conclusion of our Finadium Investors in Securities Lending Conference last week in New York. One notable item was a press release…

WFE and Oliver Wyman report examines market infrastructures’ role for market integrity

April 12, 2018

CCPs, Oliver Wyman, WFE

The World Federation of Exchanges, the global industry group for exchanges and central counterparties (CCPs), published a joint report with global management consultancy Oliver Wyman on the pivotal role of…

NY Fed’s Dudley: systemic vulnerabilities remedied by CCPs, triparty and MMF reform

March 26, 2018

CCPs, Federal Reserve Bank of New York, MMF, triparty

Some of the obvious systemic vulnerabilities exposed by the financial crisis have been remedied, said William Dudley, President and Chief Executive Officer of the New York Fed in remarks to the…

BoE consults on cyber reporting obligation for CCPs

February 20, 2018

News and Notes, News and Notes – Fintech

Bank of England, CCPs, cyber security

The Bank of England has released a consultation on a new rule for central counterparties relating to incident reporting. BoE currently has a supervisory expectation that CCPs promptly notify it…

ESMA issues conflict of interest guidelines for CCPs

February 8, 2018

CCPs, EMIR, ESMA

The European Securities and Markets Authority (ESMA) has issued final guidelines on the management of conflict of interests for central counterparties (CCPs). Under the European Market Infrastructure Regulation (EMIR) CCPs have…

ESMA finds CCPs resilient to extreme market shocks after stress test

February 2, 2018

CCPs, ESMA, stress tests

The European Securities and Markets Authority (ESMA) has published the results of its second EU-wide stress test exercise regarding Central Counterparties (CCPs) established in the European Union (EU). The results of the second EU-wide…

CCP recovery and resolution moves forward in EU parliament

January 26, 2018

CCPs, Economic and Monetary Affairs committee, Europe, European Parliament, Resolution and recovery

The European Parliament’s Economic and Monetary Affairs committee confirmed that a report drafted by Kay Winburne and Jacob von Weizsacker received support and was voted through. The position of the…

Risk: EU lawmaker wants cost-benefit analysis for CCP rejection

January 25, 2018

News and Notes, Uncategorized

Brexit, CCPs, European Union

European Parliament member Danuta Hübner is calling on the European Securities and Markets Authority and the European Central Bank to use a cost-benefit analysis when deciding to recognize or reject…

Do EU margin requirements on anti-procyclicality for CCPs help or hurt risk management?

January 15, 2018

Jonathan Cooper

CCP, Credit Exposure, Derivatives, ESMA, Europe, OTC Derivatives Clearing, Pro-cyclicality, Regulatory, Risk Management

CCPs, Clearing, ESMA, Procyclicality, topstory

EMIR wants CCPs to hold more margin, in effect making CCPs into virtual fortresses. But the costs associated are high and the potential to push risk into markets or firms…

Global CCP group warns on Basel rules under LR

January 10, 2018

Basel capital rules, CCP12, CCPs, Leverage Ratio, margin management