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 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 […]

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 […]

It is a year since we last looked at the Capital and RWA of European banks, so today I will look at what the past year’s data shows. Background One of the lessons learned from the Great Financial Crisis was that Banks were under capitalised commensurate to their risk exposure; leading to new Basel III […]

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 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 […]

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 […]

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 […]

What You Need To Know Swaps Regulation 2.0 is a whitepaper that was presented by Chairman of the CFTC, Christopher Giancarlo, at the annual ISDA AGM. The paper sets out 6 broad areas of reform for Swaps markets. We looked at (1) Trade Execution and (2) Trade Reporting in Part One. This week, we look at […]

What You Need to Know Last week, the CFTC Chairman, Christopher Giancarlo, presented a whitepaper at the annual ISDA shindig. This whitepaper should be a pretty good guide for any regulatory changes that we can expect to see out of the CFTC for the remainder of his term (it expires in April 2019). He looked […]