Clearing

Replicating CCP Methodologies for Validation, Pricing and ‘Resource Management’

Banks have become very sophisticated in how they capture and optimise the use of key economic resources like funding value adjustment (FVA), credit value adjustment (CVA), capital and balance sheet across their business. The OTC Space: Replicating CCP Methodologies for Validation, Pricing and ‘Resource Management’.

Nasdaq OMX First to Win EU Approval to Clear Derivatives

Nasdaq OMX has kicked off Europe's next phase in making financial derivatives safer by becoming the first clearing house to be authorised under new European Union rules. Reuters: Nasdaq OMX First to Win EU Approval to Clear Derivatives.

EMIR Central Clearing Agreement: Agree in Haste, Repent at Leisure

This week’s authorisation of Nasdaq OMX as the first QCCP under EMIR should serve to concentrate the minds of the many firms who do not already have a client clearing agreement (CCA) in place. DRS: EMIR Central Clearing Agreement: Agree in Haste, Repent at Leisure.

Central Clearing for OTC: A Schlieffen Plan for the Capital Markets?

The G20’s strategic goal of reining in OTC derivatives is laudable and necessary for protecting the world’s financial system. But leveraging central counterparties as part of the solution creates its own risks and, like Germany’s defence strategy at the onset of World War I, the G20's plan needs to be reconsidered and adapted to current realities. Tabb Forum: Central Clearing for OTC: A Schlieffen Plan for the Capital Markets?

BoE Starts Review of Clearing Houses

The Bank of England has begun a review of how clearing houses test their resilience to market shocks in an effort to ensure that some of the world’s largest clearing houses pass tough new European industry standards. FT: BoE Starts Review of Clearing Houses.

Report: Automated Clearing Wave of the Future for ETDs

Participants in exchange-traded derivatives markets are urgently looking toward automation in the clearing and confirmation process, and their budgets reflect this priority. According to a new report from Omgeo and consulting firm Greenwich Associates, less than half of buy-side firms reconcile trades in real-time, and two-thirds of exchange-traded derivatives investors still rely on phones, fax machines, emails and text messages during the settlement process. Smart Blog on Finance: Report: Automated Clearing Wave of the Future for ETDs.

OTC Derivatives Market is A OK, Aite Reports

Everything is A OK in derivatives. That's what consultancy Aite Group said about the Over the Counter derivatives market, despite the increase in fragmentation in trading venues and projected consolidation among the central clearing counterparties (CCPs). Traders Magazine: OTC Derivatives Market is A OK, Aite Reports.

More Clarity Sought on CCP Insurance Offer

The uptake of insurance by clearing houses will come down to cost and robustness, Marcus Zickwolff, head of trading and clearing at Eurex Group, says. The Trade News: More Clarity Sought on CCP Insurance Offer.

Collateral Management

Call in the Plumbers

Throughout 2013 there was a gradual realisation that the previous year’s scaremongering about the so called ‘collateral crunch’ was unfounded. It is now better understood within the markets that there exist rich pools of high quality collateral that are adequate for meeting the needs of the various regulations imposed since the 2008 crisis. Rule Financial: Call in the Plumbers.

Collateral Optimisation and the Buyside

Many firms continue to wrestle with the requirements of the European Market Infrastructure Regulation (EMIR) trade reporting mandate. However, although the reporting requirements have been a challenge for most, there is evidence to suggest that an increasing number of buyside firms have fully resolved the operational EMIR connectivity challenges and are shifting their attention towards reaping the commercial benefits associated with collateral optimisation.  Finextra: Collateral Optimisation and the Buyside.

Bracing for a $2 Trillion Margin Call

The buy side will need to deposit approximately $2 trillion in cash and other eligible assets at central counterparty clearinghouses in order to meet the new clearing requirements for swaps. In this collateral-hungry world, the ability to anticipate, source, deliver and reconcile funding requirements in real time will prove essential. Tabb Forum: Bracing for a $2 Trillion Margin Call.

Risk Management

Risk Weight for the European Stability Mechanism (ESM) and European Financial Stability Facility (EFSF)

The Basel Committee on Banking Supervision has agreed that supervisors may allow banks to apply a 0% risk weight to claims on the European Stability Mechanism (ESM) and European Financial Stability Facility (EFSF). BIS: Risk Weight for the European Stability Mechanism (ESM) and European Financial Stability Facility (EFSF).

Stressing out the Banks

In America and Europe, stress tests are regularly applied to see whether the banks are becoming more resilient to another crisis. The latest results of the American stress tests shows that all but one (Zions Bancorp) of the top 30 US banks are ok. Europe is different. Having said that Europe has fudged their previous tests, this time they’re serious. The Financial Services Club Blog: Stressing out the Banks.