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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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EC Tackling Final Questions on CCP Resolution

By Cecile Sourbes
Published May 20, 2014 Risk

Rules on the recovery and resolution of central counterparties (CCPs) are expected to take shape over the next couple of months, according to participants at a Brussels conference on financial reform yesterday – but key elements, including where to draw the line between recovery and resolution, still need to be settled. The regime will determine how catastrophic losses should be allocated among clearing house participants.

Two new regulatory documents are in the works. The first is a set of proposals from the European Commission on the rules that would apply if a piece of financial market infrastructure (FMI), including clearing houses, ran into trouble. 

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SwapClear Dealers Cede Control as CCP Seeks Emir Approval

By Tom Osborn
Published May 13, 2014 Risk

The dealers that founded SwapClear at the turn of the millennium have given up control of the interest rate swap clearing service, following lengthy discussions. The move is required by Europe's new clearing regime, which restricts the power of shareholders in a central counterparty (CCP), and could open the door to significant changes in the competitive landscape – making it more likely that dealers move their business to a rival service and providing cross-margining opportunities for planned new futures products.

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Buy Side Urged to Share Risk of CCP Collapse

By Joe Rennison
Published April 30, 2014 Risk

BlackRock and Citadel say buy-side firms should accept some degree of exposure in the event of losses overwhelming a central counterparty (CCP), to ensure all participants have an incentive to behave responsibly. That could include having their variation margin payments cut – one of a range of measures now being considered by regulators and CCPs as a way of recovering a clearing house if its other financial resources are wiped out.

"As a fiduciary, our job is to produce alpha for our clients and to protect their assets – but to this point, at the end of the day, every participant in this entire system needs to be incentivised to preserve its safety and liquidity. Everybody needs to be focused on that," said Jack Hattem, head of global interest rate derivatives strategies at BlackRock, who was part of a panel discussion this morning at Risk's OTC Derivatives Clearing Summit in New York. "That's the point. You don't want to create a centralised system that is designed to take risk levels lower and then encourage bad behaviour."

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