Giancarlo looks to rescind CFTC Cross-border overreach

Following on from his Cross Border Swaps Regulation 2.0 whitepaper from last October, CFTC Chairman Giancarlo gave some updates in his speech at the recent FIA IDX in London .   He is leaving the SEF cross-border proposals to be turned into proposed rules and voted on by his successor as Chairman – Heath Tarbert.   On […]

Incentives for Central Clearing and the Evolution of OTC Derivatives

We summarise the recent CCP12 report “Incentives for Central Clearing”. This report looks at the current state of play in Cleared FX, Interest Rates and Credit. It analyses particular niches in clearing, including Latam Rates and NDFs. It concludes that clearing has increased for Linear products, but Option markets remain uncleared. Further studies on legacy […]

KCCP – Clearing is Getting Cheaper

KCCP defines the amount of capital that must be held versus default fund contributions at a CCP. The lower the value of KCCP, the lower the overall cost of clearing. CPMI-IOSCO public disclosures show that KCCP has decreased at all of the major CCPs in the past three years. We look at the data and […]

SA-CCR for US Banks

The US is introducing SA-CCR to calculate derivatives exposures in 2020. We look at the consultation. We compare add-ons under SA-CCR and the old CEM methodologies. Clarus offer FREE TRIALS of SA-CCR for Excel. SA-CCR Consultation The Federal Reserve, OCC and FDIC have launched a joint consultation on SA-CCR, the Standardised Approach to Counterparty Credit […]

Capital and RWA for Tier 1 US Banks – 2Q 2018

Last year we wrote about Capital Ratios and Risk Weighted Assets for Tier 1 US Banks and that blog remains popular to this day. Today I will provide an update using the latest quarterly figures, to see if the trend we observed with US Banks increasing capital and reducing RWA has continued into 2018. Background The Basel […]

Settle To Market – What You Need To Know about STM

Settle to Market is a recent innovation in derivatives trading. It has helped banks reduce regulatory capital and derivatives exposures. We look at STM in detail and compare it to collateralisation. The CFTC have also issued guidance on the subject. What You Need To Know Settle to Market (STM) treats Variation Margin at CCPs as […]

FICC Markets Standards

Regulations can only take us so far in improving our markets. Industry Standards to cope with conflicts of interest are therefore being created by the FMSB and backed by all large market players. Swap-pricing tied to the issuance of new bonds is a complex area that the FMSB is creating Standards for. We take a […]

Current Exposure Methodology – What You Need To Know

The Current Exposure Methodology is a key part of Leverage Ratio calculations. It dates back to the late 1980s and the first Basel accords on banking capital. CEM calculates the Potential Future Exposure of a derivative trade using a look-up table based on Asset Class and Maturity. CEM is a very simple, notional-based measure of […]