Search

Marex, a diversified financial services platform, will become the first futures commission merchant (FCM) to offer client clearing of interest rate swaps on LCH's SwapClear. This move addresses client demand for greater counterparty risk diversification, clearing capacity, and improved market connectivity. Marex's entry into the interest rate swaps clearing market is seen as significant given its size and recent consolidation. The firm's non-bank clearing solution is broker agnostic and can complement existing bank relationships. Marex's CEO has also expressed the possibility of further acquisitions to maintain growth. [Extracted from the article]

The Bank of England (BoE) has announced its third stress test for UK clearing houses, focusing on credit risks. The test will assess LCH, ICE Clear Europe, and LME Clear, and will examine the ability of default funds to withstand simultaneous defaults. Unlike previous tests, this version will not include a liquidity stress test. The results of the test are expected to be published at the end of the year. The BoE is also conducting a separate wider system-wide exploratory scenario (SWES) that covers 50 firms, including two clearing houses. [Extracted from the article]

Senior managers at Goldman Sachs, JP Morgan, and Morgan Stanley have expressed concerns about the proposed Basel endgame rules, stating that they could lead to more derivatives clearing firms leaving the industry. The executives voiced their concerns at a hearing held by the US Commodity Futures Trading Commission. They argued that the rules could increase capital constraints on large derivatives portfolios, such as those held by investment banks. The US version of the Basel endgame rules is set to take effect in June 2025. Additionally, the Federal Reserve has proposed a separate surcharge for global systemically important banks, which would also increase capital requirements for US banks offering clearing services. The head of regulatory affairs at Morgan Stanley emphasized the need for further understanding of the impact of these rule changes on portability and customer access to clearing services. The UK Prudential Regulation Authority has also delayed the implementation of its own Basel endgame rules. Trade bodies have criticized the Basel endgame proposals, with the CEO of the International Swaps and Derivatives Association calling for cooperation among US regulators to understand the potential effects on derivative markets. [Extracted from the article]

Marex, a non-bank FCM, has hired Stuart Kidd, a former JP Morgan clearing expert, as its new interest rate swap client clearing product manager in London. This appointment allows Marex to provide access to swap clearing through its membership of LCH, the dominant swaps clearing house owned by LSEG. Marex has been focusing on expanding its client intermediation business this year, particularly in commodities. The firm has made several new hires, including two to its board in the US, and plans to list in New York later this year. [Extracted from the article]

LCH, a clearing house, has added BNP Paribas as the first futures commission merchant (FCM) on its US credit default swap service, signaling its intention to challenge ICE's credit derivatives clearing service. LCH's credit clearing business experienced a significant increase in volumes last year, partly due to ICE closing its London-based service and consolidating it within its US clearing house. LCH processed a record $548 billion in notional in 2023, up 342% from the previous year. This move by LCH expands its services to US clients and provides more choices in CDS clearing. [Extracted from the article]

The Bank of England has assumed emergency powers over clearing houses, allowing it to restrict payments during times of extreme stress. The new rules aim to protect financial stability and are aligned with the bank's objective. The ability to restrict payments can only be used for a maximum of five years, and the bank will consider the clearing house's ability to hire and retain staff during this period. These powers were granted as part of the post-Brexit Financial Services and Markets Act 2023, which outlined the need for a special resolution regime for UK clearing houses. The International Swaps and Derivatives Association has called for additional safeguards in response to the expansion of the Bank of England's powers. [Extracted from the article]

The Bank for International Settlements (BIS) is proposing reforms to prevent large banks from manipulating their capital requirements by reducing their exposures around calculation windows. The BIS Basel Committee for Banking Supervision (BCBS) is seeking to change its methodology for assessing global systematically important bank (G-SIB) capital requirements by using average values over the course of the year instead of end-of-year figures. The committee has also published a report on "window dressing," which refers to banks reducing metrics that affect the calculation around assessment dates. The BIS is calling this behavior unacceptable and is concerned about its impact on financial markets. The consultation on the rule change is open until June 7. [Extracted from the article]

Citigroup has criticized the Basel end-game capital requirements on investment banks, stating that the proposals will make the market less resilient. The regulatory proposals would increase the capital for clearing by 22%, which would raise the cost of hedging and restrict firms' access to derivatives. Additionally, a proposal under the new rules would include the notional value of client-cleared swaps in the overall capital calculation, leading to a further 58% increase in the amount of capital needed by clearing banks. The combination of the G-SIB surcharge and the Basel III endgame proposal is expected to result in $7.2 billion of additional capital allocations for the top six US banks. [Extracted from the article]

The chief executive of the Securities Industry and Financial Markets Association (SIFMA) has called for an extension to the comment period on the Basel capital requirements for large banks holding derivatives. The US Federal Reserve Board and two other agencies have already pushed back the comment period to January 16, 2024, and launched a data gathering exercise that also ends on that date. SIFMA's president and CEO, Kenneth Bentsen, has expressed concerns that the current plan does not allow for the data gathering exercise to inform feedback by firms, and believes that a delay to the comment deadline would allow for more thoughtful comments. The Basel III rules, known as the "endgame," have received strong reactions from trade associations, particularly regarding their impact on derivatives clearing and trading by banks. [Extracted from the article]

Singapore-based OCBC on Thursday said it has joined LCH interest rate swap clearing service, called SwapClear, after seeing growing demand from corporate customers for hedging. OCBC has become a clearing member of LCH and Hong Kong Exchanges and Clearing (HKEX) in response to growth in the Asian bank's interest rate swaps and Chinese currency derivatives businesses. [Extracted from the article]

Finteum has progressed with 19 global banks on its intraday funding platform, and is set to complete its first live trade by the end of 2023. Also, bank risk teams will be allowed to input intraday credit limits into the platform, to manage intraday counterparty credit risk, said the firm. [Extracted from the article]

The Bank of England has discussed minimum haircuts or reducing the lookback period for calculating margin on cleared repo to address problems in the UK debt market late last year. The Bank of England published on Monday the minutes of the latest Money Markets Committee meeting held on June 20, which discussed the UK repo market after the British mini-budget in September. [Extracted from the article]

The Bank of England (BoE) has proposed an increase in the fees the bank charges clearing houses and settlement depositories, citing costs related to the regulator's wider role post-Brexit. The BoE also supervises and will levy incoming clearing houses and depositories for the first time since announcing plans and fees for the firms in November 2022. [Extracted from the article]

LCH RepoClear said that €GCPlus liquidity will be merged with the €3.3tr (£2.83tr) RepoClear liquidity pool to access additional netting opportunities for clients. LCH RepoClear fuses its RepoClear and €GCPlus services LCH RepoClear has announced it has merged its RepoClear Euro debt service, which includes specials and general collateral, with its €GCPlus service. [Extracted from the article]

ION hit the headlines in late January when the tech firm was the subject of a cyber attack leaving 42 of its clearing bank and broker clients unable to process client trades, prompting an industry-wide effort to review of cyber-security. Banks and brokers that provide derivatives clearing are set to grow their businesses to capitalise on the higher interest rate environment and stronger trading revenue, according to research from Acuiti. The survey, published on Thursday, found that nearly two thirds of clearing firms - called futures commission merchants (FCMs) - are looking to expand over the next three years, and draw a line under a tough 15 years in which the number of FCMs fell to 70 from 170 in 2008. [Extracted from the article]

"We're delighted to further extend our collaboration with LCH to enhance BrokerTec Quote by offering clients new efficiencies in trading Euro-denominated securities", said John Edwards, global head of BrokerTec. Under the collaboration, BrokerTec aims to provide an efficient way for clients to clear Euro-denominated securities with LCH through BrokerTec Quote, the dealer-to-client repo trading solution. Fixed income platform BrokerTec is expanding its partnership with LCH RepoClear to target the Euro repo market through a new clearing platform. [Extracted from the article]

The Bank of England (BoE) has said it will recognise US regulatory supervision of central counterparties (CCPs), as it prepares to categorise non-UK clearing firms. The UK central bank on Friday issued a statement formalising information sharing arrangements related to global clearing as agreed in a 2020 Memorandum of Understanding (MoU) with the US Commodity Futures Trading Commission (CFTC). [Extracted from the article]

JP Morgan completed in May its first transaction using tokenised money market fund shares as collateral. Singapore's DBS Bank has become the first bank in Asia to complete an intraday repurchase transaction on JP Morgan's blockchain network. [Extracted from the article]

LCH's interest rate swaps clearing service has added Singapore's DBS Bank as a clearing member and started accepting regional government bonds as collateral in a sign of the increasing importance the region has in the company's growth plans. In particular, LCH's expansion of collateral services to include Singapore Government Bonds was a particularly important step to meet our local market needs.". [Extracted from the article]

The three clearing houses in London have passed a Bank of England stress test though the London Metal Exchange's Base metal clearing service did almost deplete its default fund under the test conditions. The Bank of England supervisory stress test (SST) is designed to assess the performance of the clearing houses under extreme market stress characterised by the default of the clearing houses' two largest clients. [Extracted from the article]

But Mueller said the volatility in the European market this year tested the market's perception of Eurex Clearing as a credible alternative to the largest swaps clearing house LCH. With a solid chunk of the Euro swaps market and a 100% market share in longer-dated European rates derivatives, Mueller said Eurex Clearing is looking to expand into other correlated assets. Eurex Clearing "reaches stage of maturity" in Euro swaps - CEO Mueller. [Extracted from the article]

Global bank regulators should refrain from introducing additional requirements on clearing houses to address those firms' so-called non-default losses, a trade body has urged. The CCP12 paper argued that the measures already in place are sufficient to protect clearing houses from non-default loses (NDLs) and additional requirements could in fact limit their capacity to protect themselves from these exceptional risks. [Extracted from the article]

Regulation affecting margin and capital requirements for uncleared derivative holdings have spurred firms to clear more foreign exchange derivatives, according to data from post trade fintech OSTTRA. The London Stock Exchange Group has said new foreign exchange venues and an Asian hub to capture pricing shifts are key differentiators as the FX markets move to clearing. [Extracted from the article]

The review reflects increasing concerns about clearing houses' due diligence of members in light of the LME nickel disruption in March, which was partly linked to the accumulation of a massive short position by a Chinese nickel producer. However, given we have now noted there may be improvements on understanding in particular commodity and energy segments, we will adjust and take a close look at concentration exposures for products in the commodity and energy space." The head of European clearing regulation has said Europe is about to launch a review into clearing houses' scrutiny of members and specifically non-financial firms, a hot topic since a Chinese metals producer was partly blamed for the LME nickel shutdown in March. [Extracted from the article]

"Clearing banks that are directly exposed to CCP margin calls may be more aware of and therefore better prepared for the magnitude and velocity of margin calls under stressed market conditions", she said in a keynote address. The deputy director general for market infrastructure at the European Central Bank (ECB) has said increased transparency on margin models and parameters would leave clearing clients better prepared for market stress events. Clearing transparency would help clients tackle margin stress - ECB. [Extracted from the article]

ESMA launched in January its consultation on proposed anti-procyclical margin measures for central counterparties, alongside an analysis of the effect of the Covid pandemic-related market stress on margin model requirement in March 2020. The European securities regulator said it has delayed the conclusion of its probe into anti-procyclical margin measures to allow more time for market feedback. [Extracted from the article]

JP Morgan has extended its client clearing service to include index options on Intercontinental Exchange's (ICE) credit default swap (CDS) clearing service, as firms target margin efficiency for institutional traders. ICE Clear Credit launched its clearing solution for CDS index options in late 2020, with Citi as the inaugural futures commission merchant offering the service to clients for North American indices. [Extracted from the article]

"We believe that a better balance between loss allocation to clearing participants and loss allocation to CCPs would promote better outcomes from a resilience and financial stability perspective." "Overall, the consultation paper focusses disproportionately on loss allocation tools to clearing participants and does not emphasise sufficiently the role of CCPs' own financial resources", the consultation response, published on Thursday, said. A group of trade bodies have called for clearing houses to do more in the event of a member default by urging the Financial Stability Board (FSB) to rebalance the loss allocation to clearing houses in the event of defaults and stressed markets. [Extracted from the article]

He added that lending to commodity market participants and exposure through bank prime brokerage businesses were vulnerabilities highlighted by current market conditions. The chair of the Financial Stability Board (FSB) has warned of further risks arising from continued volatility in commodity markets. [Extracted from the article]

"A central counterparty's (CCP) risk appetite in relation to procyclicality is inextricably linked to liquidity risk for its participant", ISDA said in its submission on Monday. The International Swaps and Derivatives Association (ISDA) has called for clearing firms such as banks, brokers and their clients to have a greater say in proposed European anti-procyclicality (APC) reforms. [Extracted from the article]

CDSClear launched its credit index options clearing service in 2017, covering the European iTraxx Europe Main and Crossover indices, before extending it to cover the US in 2020. JP Morgan and BNP Paribas are the first banks to offer their buy-side clients the ability to clear their credit index options through LCH's CDSClear business. [Extracted from the article]

Among its other comments, the trade body also raised its concern that proposed anti-procyclicality measures aimed at improving market resilience increase complexity in CCP oversight and reduce their ability to manage risk in times of market stress. The European Association of Central Counterparty Clearing Houses (EACH) has called for a "swift" change to collateral rules relating to the clearing of energy products because the spike in energy prices has made clearing houses prohibitively expensive. The central counterparty (CCP) trade body made the proposal in its wide-ranging response to the European Commission (EC) consultation on rules governing central clearing in the European Union. [Extracted from the article]

The International Swaps and Derivatives Association (ISDA) has called for additional safeguards after the proposed expansion to the UK Treasury's role in overseeing clearing firms and depositories. ISDA and the FIA in January called for global regulators to co-ordinate stress testing of clearing counterparties as part of their response to a Bank of England consultation on wider stress testing. [Extracted from the article]

The European securities regulator has published proposals for developing a climate-specific stress test for clearing counterparties (CCPs). "The assessment of climate risk within CCPs is still in its infancy at the level of individual CCPs, and to our knowledge no cross-CCP climate stress test has been carried out in any jurisdiction", the report said. [Extracted from the article]

The European Association of Central Counterparty Clearing Houses (EACH) has called for more coordination among supervisory regulators in its comments on the Bank of England's proposed clearing stress test process. The Bank of England (BoE) in October launched its first stress test of central counterparties (CCPs) based in the UK, which will assess ICE Clear Europe, LCH, and LME Clear. EACH, which published its consultation response to the BoE's discussion paper on its general framework on Friday, has said better cooperation between regional regulators would reduce the burden on clearing houses. [Extracted from the article]

Discusses the efforts of the Nordic region to develop a single clearinghouse and integrated central securities depository, as of March 2005. Overview of the integration of several stock exchanges in the region; Progress of movement in the Nordic clearing and settlement market; Role of several countries in encouraging growth in their securities market.

Looks at the merger and acquisition activities in the European bank clearing industry as of July 2003. Implications of the merger of London Clearing House and Clearnet; Dominance of Citibank and BNP Paribas in the market; Details the results of a survey on the industry; Trend in the industry that compels clearing banks to merge. INSET: SIS SEGA INTERSETTLE READY TO CHALLENGE TOP TWO.

Assesses the chances of agent banks to be included in the plans of international central securities depositories (ICSD). Information on ICSD; Amount of equities transactions being cleared by BNP Paribas per year; Information on the merger or cooperation agreement between ABN Amro and Nordea.

Looks at the competition in clearing activities in Europe. Information on the pan-European expansion of BNP Paribas; Importance of local clearing banks; Details on the merger between Clearstream and Euroclear. INSET: SURVEY STATISTICS.

Deals with the demand of broker-dealers in terms of equity clearing and settlement processing addressed to clearing banks in Europe. Advantages demanded by broker-dealers; Why most broker-dealers have become remote members of stock exchanges; Comments from Charley Cock, head of multi-direct clearing and custody at BNP Paribas Securities Services. INSET: Methodology.

"Vladimir knows the Russian financial market, and the market knows him", Marich said. The exchange has expanded its derivatives business this year, including a May launch of cash-settled futures linked to the US equity market and a January launch of options on natural gas futures. Moscow Exchange (Moex) has named Vladmir Yarovoy as its new head of derivatives, who rejoins the firm after five years at Sberbank CIB to realise plans to grow the Russian exchange's derivatives business. [Extracted from the article]

"Together with Euroclear Bank, Shanghai Clearing House will continue to optimize the Yulan bond structure in line with market demand under the guidance of regulatory authorities, which will further contribute to the further blossoming of the Yulan bond." Euroclear's Yulan bond structure has received its first investment bank issuance in China from Shanghai-headquartered Guotai Junan Securities. [Extracted from the article]

The Bank of England has begun its first stress test of central counterparties (CCPs) based in the UK, in a process which will assess ICE Clear Europe, LCH, and LME Clear. In line with proposals published in its June discussion paper, the Bank will analyse credit and liquidity risk using Bank and CCP analysis. [Extracted from the article]

CME said all participating clearing brokers will be provided with Sustainable Clearing eligibility criteria aligned with industry standards. CME Group plans to launch the world's first Sustainable Clearing service that enables clearing clients to track their sustainable derivatives positions. The exchange group said clearing brokers will also be able to offer visibility to their clients such as asset managers so those investors can track the sustainability performance of their various clearing brokers. [Extracted from the article]

"EEX provides market participants transparent, robust and trusted price signals, which help market participants to take investment decisions for new renewable assets, or to reduce the carbon footprint in the maritime industry." "By using EEX' standard power futures for PPA hedging, market participants can hedge their future price risk and mitigate their counterparty risk, as all transactions are cleared and settled by our clearing house, European Commodity Clearing." The European Energy Exchange (EEX) has extended the maturity of its European power futures, surpassing another milestone in its plan to enable market-based sustainability products for clients. [Extracted from the article]

Cboe Europe Derivatives has said it plans to start sharing revenue with clients from early next year, in a move to align better its commercial interests with those of its trading customers. The Amsterdam-based exchange has said it will also make a six monthly revenue share pool available to liquidity providers from January 1 2022 to December 31 2024. [Extracted from the article]

Amsterdam-based Cboe Europe Derivatives is its first European derivatives market, initially offering futures and options based on six Cboe European indices. Cboe Global Markets has launched its European futures and options market on Monday, the US exchange group has confirmed. [Extracted from the article]

JP Morgan, Morgan Stanley and Commerzbank are live on a new foreign exchange derivatives clearing service from Eurex that promises major capital reductions for banks. Deutsche Boerse also said the launch of the guaranteed settlement FX derivatives clearing services is another example of the exchange group supporting the transition of over-the-counter derivatives to clearing. [Extracted from the article]