Download or read book Recommendations for Central Counterparties written by Group of Ten. Committee on Payment and Settlement Systems and published by . This book was released on 2004 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Central Counterparties written by Jon Gregory and published by John Wiley & Sons. This book was released on 2014-06-17 with total page 329 pages. Available in PDF, EPUB and Kindle. Book excerpt: Practical guidance toward handling the latest changes to the OTC derivatives market Central Counterparties is a practical guide to central clearing and bilateral margin requirements, from one of the industry's most influential credit practitioners. With up-to-date information on the latest regulations imposed after the global financial crisis, this book covers the mechanics of the clearing process and analyses the resulting consequences. Detailed discussion explains the ways in which the very significant clearing and margining rules will affect the OTC derivatives market and the financial markets in general, with practical guidance toward implementation and how to handle the potential consequences. Over-the-counter derivatives were blamed by many for playing a major role in the 2007 financial crisis, resulting in a significant attention and dramatic action by policymakers, politicians, and regulators to reduce counterparty credit risk which was seen as a major issue in the crisis. The two most important regulatory changes are the mandatory clearing of standardised OTC derivatives, and the requirements for bilateral margin posting in non-standard OTC contracts. Central Counterparties is a complete reference guide to navigating these changes, providing clarification and practical advice. Review the mitigation of counterparty credit risk with the historical development of central clearing Clarify the latest regulatory requirements imposed by Dodd-Frank, EMIR, Basel III and more Learn the mechanics of central clearing, with special attention to complex issues such as margin calculations, the loss waterfall, client clearing and regulatory capital rules Gain insight into the advantages and disadvantages of clearing and bilateral margin requirements, and the potential issues that arise As the clearing and margining mandates are phased in, the associated costs will be severe enough to dramatically shift the topology of the financial markets and transform the nature of risk. Central Counterparties provides the information, clarification and expert insight market practitioners need to get up to speed quickly.
Download or read book Central Counterparties Resolution An Unresolved Problem written by Mr.Manmohan Singh and published by International Monetary Fund. This book was released on 2018-03-20 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recovery and resolution regimes are being developed for central counterparties (CCPs). We analyse current resolution tools in the context of policy, which is to restore the critical functions of a failed CCP. We conclude that the toolkit is insufficient to avoid the costs of resolution being borne by taxpayers, and propose alternative policy suggestions for addressing the problem of a failed CCP.
Download or read book Central Counterparties written by Froukelien Wendt and published by International Monetary Fund. This book was released on 2015-01-27 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Central counterparties (CCPs) can offer significant benefits to a market. However, CCPs are also highly interconnected with financial institutions and markets and therefore too important to fail. The increased volumes cleared through CCPs and their increasing global scope, in particular in the OTC derivatives market, make it even more important that systemic risks related to CCPs are managed. This paper argues that the current set of international policy measures does partly address these risks, but that alternative policy measures are needed to reduce remaining systemic risks. For example, the paper recommends network analysis to be conducted by CCPs and authorities to gauge potential losses and suggests a common international approach to central bank services to help reduce the dependency of CCPs on services provided by commercial banks.
Download or read book The Risk Controllers written by Peter Norman and published by John Wiley & Sons. This book was released on 2011-09-07 with total page 403 pages. Available in PDF, EPUB and Kindle. Book excerpt: Clearing houses, or CCPs, were among the very few organisations to emerge from the global financial crisis with their standing enhanced. In the chaotic aftermath of the bankruptcy of Lehman Brothers, they successfully completed trades worth trillions of dollars in a multitude of financial instruments across listed and over-the-counter markets, and so helped avert financial Armageddon. That success transformed the business of clearing. Governments and regulators around the world gave CCPs and the clearing services they provide a front-line role in protecting the global economy from future excesses of finance. CCPs, which mitigate risk in financial markets, responded by greatly expanding their activities, notably in markets for over-the-counter derivatives, and often in fierce competition with one another. In The Risk Controllers, journalist and author Peter Norman describes how CCPs operate, how they handled the Lehman default, and the challenges they now face. Because central counterparty clearing is a complex business with a long history that continues to influence decisions and structures even in today’s fast changing world, The Risk Controllers explores the development of CCPs and clearing from the earliest times to the present. It draws on the experiences of the people who helped to shape the business of clearing today. It sets the development of CCPs and clearing in the broader context of changes in society, politics and regulation. The book examines turning points, such as the 1987 stock market crash, that set clearing on a new path and the impact of long running trends, including the exponential growth of computer power and the ebb and flow of globalisation. Written in non-technical language, The Risk Controllers provides a unique and accessible guide to CCPs and clearing. It is essential reading for clearing professionals, legislators and regulators whose job it is to take this vitally important business into the future. “The recent crisis has, thankfully, renewed interest in the importance of central counterparties: how they can help preserve stability or, as Hong Kong showed in 1987, undermine stability if they are not super sound. Peter Norman’s book places the role of clearing houses in a historical context, and explains why the financial system’s plumbing matters so much. It should be read by anyone interested in building safer capital markets.” Paul Tucker, Deputy Governor Financial Stability, Bank of England
Download or read book The Law and Regulation of Central Counterparties written by Jiabin Huang and published by Bloomsbury Publishing. This book was released on 2010-10-20 with total page 230 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Law and Regulation of Central Counterparties provides a detailed analysis of the legal and regulatory aspects of Central Counterparties (CCPs) with an introduction to their role and functions in modern financial markets. The book begins by describing in detail basic elements of modern post-trade infrastructure, exploring the modern functional and operational aspects of CCPs in the markets. It moves on to discuss the relationships between CCPs and their members, and clients of clearing members as non-members, legal issues concerning collateralisation, netting and set-off, and default arrangements that are primarily embedded in the form of the rules and regulations of CCPs. With regard to regulatory issues, the book examines the regulatory framework with reference to the UK and the EU. As to the case for a single CCP for various different types of markets, the analysis covers the advantages and disadvantages of CCP clearing and carries out an assessment of the risks and benefits of a single multi-market CCP.
Download or read book France written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2013-07-01 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper discusses key findings of the Detailed Assessment of LCH.Clearnet SA Observance of the Committee on Payment and Settlement Systems/International Organization of Securities Commission (CPSS–IOSCO) Recommendations for Central Counterparties. The findings reveal that LCH.Clearnet SA displays a high level of observance of the CPSS/IOSCO recommendations. It has a sound, coherent, and transparent legal basis. It has developed an adequate risk-management framework to address financial and operational risks. LCH.Clearnet SA governance arrangements and composition of Boards and management are well defined and adequately staffed.
Download or read book Central Counterparties and Their Financial Resources A Numerical Approach written by Paul Nahai-Williamson and published by . This book was released on 2013 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: New regulatory standards require central counterparties (CCPs) to have robust processes in place to mitigate their counterparty credit risk exposures. At the same time, the standards allow CCPs to tailor their risk management models. This paper considers how CCPs can optimally determine the relative mix of initial margin and default fund contributions in a stylised setting, by balancing the costs of default resources with the expected losses they protect against. Where members are of good credit quality and the probability of experiencing losses is low, the loss-mutualising properties of the default fund are favoured over the defaulter-pays properties of initial margin. Significant tail risks in the markets cleared by the CCP further favour the use of the default fund as a cost-effective insurance against potentially large losses. By contrast, when members are more likely to default or extreme losses are unlikely, the CCP has incentives to maximise the defaulter-pays collateral it takes, and the benefits of the loss-mutualising default fund are reduced. Our numerical results support the recognition that CCPs should have some discretion over how they set the optimal level and composition of their default resources, based on the specific risks of the markets and portfolios that they clear. Our results also show that changes in collateral costs and capital requirements can have a significant impact on a CCP's optimal risk management choices.
Download or read book Collateral Netting and Systemic Risk in the OTC Derivatives Market written by Mr.Manmohan Singh and published by International Monetary Fund. This book was released on 2010-04-01 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: To mitigate systemic risk, some regulators have advocated the greater use of centralized counterparties (CCPs) to clear Over-The-Counter (OTC) derivatives trades. Regulators should be cognizant that large banks active in the OTC derivatives market do not hold collateral against all the positions in their trading book and the paper proves an estimate of this under-collateralization. Whatever collateral is held by banks is allowed to be rehypothecated (or re-used) to others. Since CCPs would require all positions to have collateral against them, off-loading a significant portion of OTC derivatives transactions to central counterparties (CCPs) would require large increases in posted collateral, possibly requiring large banks to raise more capital. These costs suggest that most large banks will be reluctant to offload their positions to CCPs, and the paper proposes an appropriate capital levy on remaining positions to encourage the transition.
Download or read book Limiting Taxpayer Puts An Example from Central Counterparties written by Mr.Manmohan Singh and published by International Monetary Fund. This book was released on 2014-11-12 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: Nonbanks such as central counterparties (CCPs) are a useful lens to see how regulators view the role of the lender-of-last-resort (LOLR). This paper explores the avenues available when a nonbank failure is likely, specifically by considering the options of keeping CCPs afloat. It is argued that CCPs have, by regulatory fiat, become “too important to fail,” and thus the imperative should be greater loss-sharing by all participants that better align the distribution of risks and rewards of CCPs, the clearing members and derivative end-users. In the context of LOLR, the proposed variation margin gains haircut (VMGH) is discussed as a way of limiting the taxpayer put.
Download or read book The World Scientific Handbook of Futures Markets written by Anastasios G. E. T. Al MALLIARIS and published by World Scientific. This book was released on 2015-08-06 with total page 844 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The World Scientific Handbook of Futures Markets serves as a definitive source for comprehensive and accessible information in futures markets. The emphasis is on the unique characteristics of futures markets that make them worthy of a special volume. In our judgment, futures markets are currently undergoing remarkable changes as trading is shifting from open outcry to electronic and as the traditional functions of hedging and speculation are extended to include futures as an alternative investment vehicle in traditional portfolios. The unique feature of this volume is the selection of five classic papers that lay the foundations of the futures markets and the invitation to the leading academics who do work in the area to write critical surveys in a dozen important topics."--$cProvided by publisher.
Download or read book Capital Requirements for Over the Counter Derivatives Central Counterparties written by Ms.Li Lin and published by International Monetary Fund. This book was released on 2013-01-08 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: The central counterparties dominating the market for the clearing of over-the-counter interest rate and credit derivatives are globally systemic. Employing methodologies similar to the calculation of banks’ capital requirements against trading book exposures, this paper assesses the sensitivity of central counterparties’ required risk buffers, or capital requirements, to a range of model inputs. We find them to be highly sensitive to whether key model parameters are calibrated on a point-in-time versus stress-period basis, whether the risk tolerance metric adequately captures tail events, and the ability—or lack thereof—to define exposures on the basis of netting sets spanning multiple risk factors. Our results suggest that there are considerable benefits from having prudential authorities adopt a more prescriptive approach to for central counterparties’ risk buffers, in line with recent enhancements to the capital regime for banks.
Download or read book Global Financial Stability Report April 2010 written by International Monetary Fund. Monetary and Capital Markets Department and published by INTERNATIONAL MONETARY FUND. This book was released on 2010-05-20 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Risks to global financial stability have eased as the economic recovery has gained steam. But policies are needed to reduce sovereign vulnerabilities, ensure a smooth deleveraging process, and complete the regulatory agenda. The April 2010 Global Financial Stability Report examines systemic risk and the redesign of financial regulation; the role of central counterparties in making over-the-counter derivatives safer; and the effects of the expansion of global liquidity on receiving economies.
Download or read book Regulating Financial Derivatives written by Alexandra G. Balmer and published by Edward Elgar Publishing. This book was released on 2018-06-29 with total page 228 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book puts forward a holistic approach to post-crisis derivatives regulation, providing insight into how new regulation has dealt with the risk that OTC derivatives pose to financial stability. It discusses the implications that post crisis regulation has had on central counterparties and the risk associated with clearing of OTC derivatives. The author offers a novel solution to tackle the potential negative externalities from the failure of a central counterparty and identifies potential new risks arising from post crisis reforms.
Download or read book The Role of Central Counterparties written by and published by . This book was released on 2007 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book United States written by International Monetary Fund and published by International Monetary Fund. This book was released on 2010-05-15 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper discusses key findings of the Detailed Assessment of Observance of the National Securities Clearing Corporation’s (NSCC) Observance of the Committee on Payment and Settlement Systems/International Organization of Securities Commissions (CPSS–IOSCO) Recommendations for Central Counterparties (CCP) for the United States. The assessment recommends that a CCP should have a well-founded, clear, and transparent legal basis in the relevant jurisdictions. A CCP should require participants to have sufficient financial resources and robust operational capacity to meet obligations arising from participation in the CCP.
Download or read book Collateral Management written by Michael Simmons and published by John Wiley & Sons. This book was released on 2019-02-18 with total page 877 pages. Available in PDF, EPUB and Kindle. Book excerpt: Insight into collateral management and its increasing relevance in modern banking In the wake of recent financial crises, firms of all sizes have adjusted their policies to incorporate more frequent instances of collateral management. Collateral Management: A Guide to Mitigating Counterparty Risk explains the connection between the need for collateral management in order to alleviate counterparty risk and the actions that firms must take to achieve it. Targeted at middle and back office managers seeking a hands-on explanation of the specifics of collateral management, this book offers a thorough treatment of the subject and attends to details such as internal record management, daily procedures used in making and receiving collateral calls, and settlement-related issues that affect the movements of cash and securities collateral. An expert in financial topics ranging from trade lifecycle to operational risk, author Michael Simmons offers readers insight into a field that, so far, is struggling to produce enough expertise to meet its high demand. Presents hands-on advice and examples from a bestselling, internationally renowned author who introduces his third book on operations and operations-related activities Explains the relationship between collateral management and preventing institutional defaults, such as the recent Lehman Brothers downfall Since 2008, firms have recognized and embraced the importance of collateral management, but this book will provide practitioners with a deeper understanding and appreciation of its relevance.
