The Commodity Futures Trading Commission (CFTC) produces a monthly cleared margin report for DCOs (CCPs) required to file daily initial margin with the CFTC’s Division of Clearing and Risk. The report aggregates initial margin from six DCOs: CME, ICE Clear Credit, ICE Clear US, ICE Clear Europe, LCH Ltd and LCH SA. The latest report […]

My recent blog on Archegos, Trade Repositories and Initial Margin, was very popular, so I wanted to do a follow up on the same two topics; transparency of derivatives and initial margin requirements. For those of you not familiar with the three letter acronym, APA, it stands for Approved Publication Arrangement which is a European […]

Amongst the many questions that standout from the huge losses suffered by prime brokers in closing out the positions of Archegos Capital Management, the two that interest me most are, first the lack of transparency of the derivatives (total return swaps) used for these positions and second the in-adequate risk management by the prime brokers. […]

Clearing Houses have recently published data on the magnitude of margin calls they made in Q1 2020 and these are interesting to say the least. Given the massive price volatility we observed in March across all asset classes, we knew these were going to be big numbers, so let’s dive into the detail. Variation Margin […]

Given the recent increases in initial margin that I covered in a few recent blogs (see Procyclical margins in the time of Covid-19 and Crashing rates and swap margins), I wanted to look into backtesting of margin models. Background Backtesting is a well established practice, widely used by all CCPs to check the adequacy of […]

I recently read an interesting BIS Bulletin, titled “The CCP-Bank nexus in the time of Covid-19”, by Wenqian Huang and Elod Takis (available here), with the following key takeaways: The specific part I am going to focus on today is the third bullet point, “higher margins should be expected but the extent of procyclicality or […]

We analyse how much Initial Margin is being held versus derivatives in 2019. This covers cleared and uncleared OTC derivatives, plus exchange traded contracts (Futures and Options). It is difficult to perform the same analysis for Variation Margin. We take a look at the latest ISDA Margin Survey to see if it holds the answers. […]

In observing the markets over the last few weeks there are so many significant moves; Oil prices collapsing by 30% in a day, S&P500 declining 7.6% in a day, the 7th worst move since WW2 and worst since 2008, the whole US Treasury Curve out to 30Y trading below 1% for the first time ever. […]

Today BCSB IOSCO put out a press release announcing two significant changes to the UMR timeline: A one-year extension, to Sep-21 for the final UMR implementation phase for firms with > $8 billion of aggregate average notional amount (AANA) of un-cleared derivatives. An new phase for firms with > $50 billion of AANA on the […]

The Default at Nasdaq Clearing has re-invigorated industry discussions on default management practices and we are now seeing the fruits of these labours. For example CCP12 recently published a CCP Best Practices Paper and LCH published Best Practices in CCP Risk Management. Today I will look at the BIS CPMI-IOSCO “Discussion paper on central counterparty […]