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ISDA AGM: Calls for “Fat Finger” Derivatives Safeguards

By Christopher Whittall
Published April 10, 2014 IFR

The new market structure for trading derivatives on electronic platforms and clearing through central counterparties needs more robust safeguards against operational blunders such as “fat finger” trades, an audience at the ISDA AGM in Munich heard today.

Cash equities and futures exchanges have developed controls and protocols to deal with trading errors over the past decade as high frequency trading has become more prevalent. Bill De Leon, global head of portfolio risk management at Pimco, said derivatives markets haven’t really seen a shift towards HFT, but noted this may happen in certain segments of the market that are undergoing greater standardisation.

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Asia Dealers Review CCP Risk Management Approaches

By Viren Vaghela
Published April 7, 2014 Asia Risk

Bank risk teams have been embarking on a whirlwind tour of Asian markets from Sydney to Tokyo to Delhi to conduct due diligence on Asia's seven clearing houses that are open for business.

"We have an internal team that looks at each central counterparty (CCP) membership that we have in place and for the new ones – they visit each CCP and examine the structure before we consider becoming a member," says Andrew Baker, head of derivative clearing sales Asia at HSBC in Hong Kong

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DTCC Survey Shows Growing CCP Concern

By Richard Henderson
Published April 3, 2014 The Trade

A system risk survey conducted by Depository Trust and Clearing Corporation (DTCC) has shown a doubling of the number of industry participants worried about risk in central counterparties (CCPs) with the onset of central swaps clearing.

The survey, published last week by the DTCC, has found 18% of respondents, up from 8% in 2013, fear clearing houses may become single points of failure in a similar way to banks’ housing of swaps positions they were unable to unwind during the financial crisis.

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More Clarity Sought on CCP Insurance Offer

By Paloma Migone
Published March 21, 2014 The Trade

The uptake of insurance by clearing houses will come down to cost and robustness, Marcus Zickwolff, head of trading and clearing at Eurex group says.

About 20 insurance companies have been brough together by New York based GCSA LLC to offer coverage to clearing houses processing millions of derivatives trades in case of default.

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OTC Derivatives Market is A OK, Aite Reports

By John D'Antona, Jr.
Published March 21, 2014 Traders Magazine

Everything is A OK in derivatives.

That's what consultancy Aite Group said about the Over the Counter derivatives market, despite the increase in fragmentation in trading venues and projected consolidation among the central clearing counterparties (CCPs). The findings are part of its latest research report, "OTC Derivatives Clearing in 2014: Pump Up the Volume."

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BoE Starts Review of Clearing Houses

By Philip Stafford
Published March 17, 2014 Financial Times

The Bank of England has begun a review of how clearing houses test their resilience to market shocks in an effort to ensure that some of the world’s largest clearing houses pass tough new European industry standards.

The disclosure, in the Bank’s first annual report on markets infrastructure, comes as European regulators examine applications by the region’s clearing houses to operate their businesses under new rules.

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Overnight Heroes: Central Banks Weigh Loans for CCPs

By Cecile Sourbes
Published March 14, 2014 Risk

Clearing houses can be separated into haves and have-nots. The first group, which includes Eurex, LCH.Clearnet's French subsidiary, and Singapore Exchange (SGX), knows that in the event of a temporary, but large, cash shortfall, it can obtain emergency liquidity support from its central bank. The have-nots hope they could do the same, but their own central banks refuse to make a public commitment, and – in the eyes of some clients – that puts them at a disadvantage.

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European CCPs Overhaul Futures Margin Models

By Tom Osborn
Published January 28, 2014 Risk

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Japan Dealers Stop Back-Loading to CCPs Due to De Minimis Uncertainty

By Viren Vaghela
Published January 7, 2014 Risk

Dealers in Japan are no longer back-loading older trades with US persons to clearing houses due to uncertainty around whether trades will fall within the $8 billion de minimis bucket that counts towards registering as a swap dealer with the Commodity Futures Trading Commission (CFTC).

Ever since the CFTC outlined that banks with significant US derivatives businesses should be subject to US rules, dealers in Asia have been keen to bypass what is widely perceived as an extraterritorial application of global derivatives rules.

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CFTC Correct in Row Over US Treasury Liquidity - Risk.net Poll

By Lukas Becker
Published December 16, 2013 Risk

The Commodity Futures Trading Commission (CFTC) is right to require central counterparties (CCPs) to have a committed funding backstop in place for US Treasury bonds and other government debt, according to a new Risk.net poll.

Of the respondents, 56% agree with the CFTC's stance that bonds can only be counted towards a CCP's liquidity resources if they are backed with committed funding arrangements – allowing them to be turned into cash immediately. The rest of the respondents disagreed.

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