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New Clearing Model Emerges as Costs Rise

By Jon Watkins
Published September 12, 2014 The Trade

Rising fees set by clearing brokers have spurred a new model aimed at smaller buy-side firms who are looking for a cost-efficient way to clear their derivatives trades.

The new concept, known as a sub central counterparty (CCP), was inspired by elements from Asia’s clearing market and is now being considered in Europe and the US.

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CCPs Should Prioritise Resolution and Recapitalisation, Says JP Morgan

Published September 12, 2014 The Trade

A J.P. Morgan research paper has called for substantive changes to ensure that central counterparties (CCPs) can continue as ongoing concerns and serve as the market-stabilising force envisaged by regulators.

The bank’s Office of Regulatory Affairs has questioned the robustness of CCPs and whether they have sufficient financial safeguards to minimise the threat of the new too big to fail.

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Barnier Hints at Longer Pensions Clearing Exemption

By Cecile Sourbes
Published September 12, 2014 Risk

The EC's head of internal markets, Michel Barnier, has hinted that the regulator will extend the pension funds derivatives clearing exemption beyond 2015

The European Commission's outgoing head of the internal market and services division, Michel Barnier, has hinted that the EC will extend the temporary exemption pension funds have from mandatory clearing of their over-the-counter derivatives trades beyond 2015.

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ICE Acquires Majority Stake in Dutch Clearing House

By Jon Watkins
Published September 10, 2014 The Trade

Intercontinental Exchange (ICE) has boosted its presence in Europe through yet another acquisition, gaining a majority stake in the Holland Clearing House (HCH).

The European central counterparty (CCP) is the primary clearing house for The Order Machine (TOM) multilateral trading facility, a fast-growing equity options rival to Euronext in the country.

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LCH Payments System Raises Concentration Concerns

By Cecile Sourbes
Published September 8, 2014 Risk.net

A significant proportion of payments between clearing members and LCH.Clearnet are transferred via just two banks, claim market participants, creating concentration and systemic risk concerns across the industry.

When a clearing member has to transfer a cash payment such as initial or variation margin to LCH.Clearnet Limited, the clearing house's UK subsidiary, it has to do so via an account at a so-called protected payments system (PPS) banking entity. The clearing member deposits its funds in an account at one of the PPS entities, which LCH.Clearnet electronically debits for the amount required.

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CCPs to Get Mltiple Recvery Planning Tools

By Cecile Sourbes
Published September 5, 2014 Risk.net

International regulators will lay out a range of tools to help central counterparties (CCPs) plan for their recovery should they run into trouble instead of specifying one approach, according to Benoît Coeuré, executive board member at the European Central Bank (ECB).

"Each CCP will be able to pick the tools it needs from the CPSS-Iosco report to plan for its recovery depending on its specificities and its balance-sheet structure, since the assets and liabilities can vary across institutions depending on their business models," says Coeuré in an interview with Risk.

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Frontloading Still a Thorn in Industry's Side

Published September 2, 2014 Automated Trader

Published responses to ESMA's clearing obligation consultation show an industry still grappling with the potential fallout of implementation.

Under the European Market Infrastructure Regulation, firms will be clearing interest rate and credit default swaps through central counter parties. For IRS, four classes of swaps are up; basis swaps, fixed-to-float interest rate swaps, forward rate agreements and overnight index swaps on a range of currencies and maturities.

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South Africa Still Unsure About Onshore CCP

By Fiona Maxwell
Published September 2, 2014 Risk.net

U.S. regulators, closing in on their mandate to force financial firms to prove they can weather another credit crisis, are set today to finish two key rules governing the banks’ balance sheets.

The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. are ready to issue a mandate that banks set aside enough easy-to-sell assets to survive a 30-day liquidity drought and wrap up rules on how much loss-absorbing capital must be held against total assets.

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Eurex and LCH.Clearnet Seek OK for Inflation Swaps

By Tom Osborn
Published August 19, 2014 Risk 

A new front is set to open in the swaps clearing battle between LCH.Clearnet and Eurex, with both central counterparties (CCPs) on track to launch clearing for inflation swaps early next year, pending regulatory approval. That will come as a relief to market participants that are already struggling with the increased capital and funding burdens the product attracts, and that would face extra margin costs if interest rate swaps were subject to a clearing mandate while often-offsetting inflation swaps remained in the non-cleared world.

Dan Maguire, London-based chief executive of LCH.Clearnet's SwapClear business, confirms the CCP is in the throes of getting regulatory approval to clear inflation swaps. It is understood the CCP hopes to begin clearing the products in the first quarter of next year, pending approval by the Prudential Regulation Authority (PRA) and a European college of regulators.

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EU Regulators Concerned by CFTC's Foreign CCP Rules

By Lukas Becker
Published May 23, 2014 Risk

European regulators are warning that planned US rules for foreign clearing houses that would bar them from accepting US clients could prevent US central counterparties (CCPs) being approved under Europe's own rules.

The prospect of an authorisation tug-of-war stems from the European Market Infrastructure Regulation (Emir), which states that a country's clearing regulation can only be deemed equivalent if it has a reciprocal regime for authorising European and other third-country clearers

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