CCP12 AMR

CCP12 aims to promote effective, practical and appropriate risk management and operational standards for CCPs to ensure the safety and efficiency of the financial markets it represents.

AMR 2021

Case Studies

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By year

2021

March 2021 | CCP12 Annual Markets Review in Central Counterparty Clearing

2020 was overshadowed by the health and economic crisis arising from the COVID-19 Crisis , so much so that what would otherwise have been remarkable news stories for the markets – transition to risk-free-rates, negative oil prices, Brexit, and key elections – have taken second stage.
This issue of the CCP12 Annual Markets Review has the COVID-19 Crisis and its effect on cleared markets as its main connecting theme, supplemented with case studies exploring salient aspects of both business-as-usual and special circumstances across our membership.
TABLE OF CONTENTS
2020

 February 2020 | Progress and Initiatives in OTC Derivatives – A CCP12 Report

Following the G20 Leaders’ pledge in 2009 to change the process by which non-standardized Over-The-Counter derivatives are traded, this CCP12 paper explores three exclusive case studies across Collateral, Foreign Exchange, and Interest Rate Derivatives in order to research the market dynamics and build critical insights across the derivatives markets.

The report examines in detail how market participants across the spectrum of the CCP industry are managing in this constantly evolving market. The paper explores key drivers of change currently taking place, the evolution in the bilateral and cleared markets and how Uncleared Margin Rules are affecting the industry.

TABLE OF CONTENTS
MESSAGE FROM THE CEO
LIST OF ABBREVIATIONS
EXECUTIVE SUMMARY

1.INTRODUCTION TO THE ANALYSIS
1.1 REGULATORY TIMELINE
1.2 DATA ANALYSIS OF CLEARED MARKETS
1.3 DATA ANALYSIS OF UNCLEARED MARKETS

2.COLLATERAL OVERVIEW
2.1 DEFINING COLLATERAL
2.2 COUNTERPARTY EXPOSURES
2.3 COLLATERAL IN UNCLEARED MARKETS
2.4 COLLATERAL IN CLEARED MARKETS
2.5 INITIAL MARGIN COSTS

3. COLLATERAL RISK MANAGEMENT
3.1 COLLATERAL RISK MANAGEMENT IN CLEARING
3.2 COLLATERAL RISK MANAGEMENT IN BILATERAL MARKETS
3.3 COLLATERAL HAIRCUTS IN CLEARED MARKETS
3.4 CASE STUDY: COLLATERAL MANAGEMENT AT EUREX CLEARING
3.5 CASE STUDY: COLLATERAL MANAGEMENT AT JSCC
3.6 COLLATERAL LIQUIDITY AND BUFFERS

4. FX MARKETS
4.1 FX MARKET OVERVIEW
4.2 NDF MARKET REVIEW
4.3 G5 NDF CLEARING
4.4 REGULATORY CHANGES TO PROMOTE CLEARING
4.5 CASE STUDY: FX OPTIONS AT LCH FOREXCLEAR

5. SHORT-TERM INTEREST RATE DERIVATIVES
5.1 INCREASED TRADING VOLUMES
5.2 INCREASED VOLUMES IN USD INTEREST RATE DERIVATIVES
5.3 OTHER USD IRDS
5.4 RISK FREE RATES

6. CONCLUSIONS
6.1 COLLATERAL
6.2 FX OPTIONS CLEARING
6.3 SHORT USD RATES
6.4 OVERALL CONCIUSIONS

7. ABOUT CCP12

8. CCP12 MEMBERS

2020

August 2020 | Primer on Credit Stress Testing – a CCP12 White Paper

Credit Stress Tests plays an important role in the risk management process of a CCP, including to size and assess the adequacy of a CCP’s financial resources. Within this CCP12 paper, a key overview of the stress testing involved at CCPs is provided.

This paper aims to provide background and context on Credit Stress Testing. It introduces the role and objective of credit Stress Testing in the context of a CCP’s overall risk management approach, gives a conceptual overview, sets out the regulatory expectations on a CCP’s Credit Stress Testing framework, discusses the different approaches to Stress Testing, and finally, describes the independent review and validation of Stress Testing.

TABLE OF CONTENTS
LIST OF ABBREVIATIONS

1. EXECUTIVE SUMMARY

2. INTRODUCTION
2.1 WHAT IS STRESS TESTING?
2.2 WHY IS STRESS TESTING IMPORTANT FOR CCPs?
2.3 HOW DOES IT FIT INTO CCP RISK MANAGMENT?

3.CONCEPTUAL OVERVIEW
3.1 RISK FACTORS
3.2 MARKET STRESS SCENARIOS
3.3 AGGREGATION
3.4 REQUIRED DATA

4.CCP APPROACH TO STRESS TESTING
4.1 GUIDING PRINCIPLES FOR STRESS TESTING
4.2 TYPES OF STRESS SCENARIOS
4.3 STRESS SCENARIO SELECTION AND RELEVANCE

5. FREQUENCY OF TESTING AND ANALYSIS

6. INDEPENDENT VALIDATION AND REVIEW
6.1 REVERSE STRESS TESTING
6.2 INDEPENDENT MODEL VALIDATION AND REVIEW
6.3 RISK POLICIES, RISK APPETITE AND GOVERNANCE
6.4 DISCLOSURE

7. CONCLUSIONS

8. REFERENCES

9. APPENDIX

10. ABOUT CCP12

11. CCP12 MEMBERS