Posts tagged 'CCPs'

Fed ponders widening its bear hug to let in FMUs

Cardiff writes mostly about US macroeconomic issues, with daily excursions into other topics about which he claim no expertise. Before Alphaville, Cardiff spent a little more than two years as a reporter at Dow Jones Financial News covering investment banking, asset management, and private equity. Along the way he has written freelance pieces on a variety of other topics from behavioural psychology to Muay Thai, the latter also being a personal interest that involves frequently getting kicked in the shins (and torso, and head).

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| May 09 13:32 | Comment |

Something that missed our radar back in March was the Federal Reserve’s proposal to allow systemically important FMUs (financial market utilities) to establish accounts with the central bank and thereby get paid interest on their reserves, much like the primary dealers.

This sounds unsexy as it is, but the quick background here is that the Dodd-Frank bill empowered the Fed to supervise those FMUs that are designated systemically important by the Financial Stability Oversight Council. And along with the added supervision, those FMUs would be allowed to open the reserve accounts with the Fed. Read more

Ring around the clearer, acts like a mirror. Default! default! They all fall down

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| May 03 08:47 | Comment |

“What happens when one bank defaults across six CCPs? The remaining members will have to pick up the bill. Given that they are almost certainly members of the other CCPs, this will result in a default contribution bill so large it could potentially lead to their failure also.”

That’s Gary Dunn, senior manager for regulatory and risk analytics at HSBC, being quoted by Risk at Isda’s AGM last week. Given the increasing concentration of risk in central counterparties, he thinks that they would ultimately have to be bailed out by taxpayers, after the CCP’s buffers were exhausted. Read more

Banks refuse to clear trades unless they can keep grandma’s money

Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

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| Jan 02 20:47 | Comment |

Ready for pop quiz? Don’t worry, it’s only one question and it involves pictures. Ready?

In the below picture, a pension fund governed under the Employee Retirement Income Security Act (Erisa) has a trading relationship with a bank… Read more

The cost of zero rates, broker edition

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Jul 23 2012 09:19 | Comment |

The FT’s Greg Meyer had a great piece out last week about the negative impact micro yields are having on the broker sector.

For a long time, the broker-dealer model has depended on the ability to reinvest customer funds to earn additional revenue. But in a zero-yield world that source of revenue is becoming constricted. Read more

The undercollateralisation risk

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| May 17 2012 18:00 | Comment |

Central counterparty clearing and settlement was always intended to make the financial system safer.

If you use a CCP, the idea goes, you’re far more robustly protected against counterparty default. The counterparty default risk has been absorbed by the much larger central entity. (The CCP can weather the default risk because its exposure is spread across numerous members.) Read more

Will a Basel risk-free ‘about turn’ be enough?

Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.

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| Dec 06 2011 09:55 | Comment |

News that Basel III is reconsidering the use of government bonds as eligible capital to be held in banks’ so-called liquidity buffers, couldn’t have come quicker.

The world, for want of another phrase, is running out of collateral. Especially in Europe. Read more