Javelin and CME clear IRS in less than 2 seconds
Story from the FT, here (subscription I think). The gist of it is:
- Javelin traded a range of maturities of IRS
- They sent them to the CME CCP
- CME cleared them in less than two seconds
The article doesn’t give enough detail on whether these were Dealer – Dealer trades, or Client – Dealer trades, and of course doesn’t say that if any new trade generates a margin call the 2 seconds becomes an hour ;-)
It also doesn’t say if in those 2 seconds, CME re-calculated the entire IM requirement, or just applied a simple mark-to-market decision process of an incremental trade. Nor does it say what the size of the existing portfolio was, that these trades were added in to.
Update: The video at Kevin McPartland’s website answers some of the questions, there were client – dealer trades. I left a comment with questions like these:
- Were these block trades?, if so, when did allocation take place?
- Did CME recalculate the entire IM requirement for each trade?
- What method was used to assess the risk on each incremental trade?
- How did confirmation / affirmation fit into the process?
- How many pre-existing trades were in the cleared portfolio?
- Was the margin account pre-funded?
- How long does registration take in the event of a margin call?