Capital Requirements for Over-the-Counter Derivatives Central Counterparties

2013 ◽  
Author(s):  
Jay Surti ◽  
Li Lin
Keyword(s):  
Capital Requirements ◽  
Over The Counter ◽  
Central Counterparties

Capital requirements for over-the-counter derivatives central counterparties

2015 ◽  
Vol 52 ◽  
pp. 140-155 ◽  
Author(s):  
Li Lin ◽  
Jay Surti
Keyword(s):  
Capital Requirements ◽  
Over The Counter ◽  
Central Counterparties

scholarly journals Capital Requirements for Over-the-Counter Derivatives Central Counterparties

2013 ◽  
Vol 13 (3) ◽  
pp. 1 ◽  
Author(s):  
Li Lin ◽  
Jay Surti ◽  
◽  
Keyword(s):  
Capital Requirements ◽  
Over The Counter ◽  
Central Counterparties

The Politics of Regime Complexity in International Derivatives Regulation

2020 ◽  
Author(s):  
Lucia Quaglia
Keyword(s):  
Financial Regulation ◽  
International Political Economy ◽  
Standard Setting ◽  
Capital Requirements ◽  
Bank Capital ◽  
Financial Industry ◽  
International Standard ◽  
Central Counterparties ◽  
Venue Shopping ◽  
Private Actors

This book examines the post-crisis international derivatives regulation by bringing together the international relations literature on regime complexity and the international political economy literature on financial regulation. Specifically, it addresses three interconnected questions. What factors drove international standard-setting on derivatives post-crisis? Why did international regime complexity emerge? How was it managed and with what outcomes? Theoretically, this research innovatively combines a state-centric, a transgovernmental and a business-led explanations. Empirically, it examines all the main sets of standards (or elemental regimes) concerning derivatives, namely: trading, clearing, and reporting derivatives; resilience, recovery, and resolution of central counterparties; bank capital requirements for bank exposures to central counterparties and derivatives; margins for derivatives non-centrally cleared. Regime complexity in derivatives ensued from the multi-dimensionality and the interlinkages of the problems to tackle, especially because it was a new policy area without a focal international standard-setter. Overall, the international cooperation that took place in order to promote regulatory precision, stringency, and consistency in the regime complex on derivatives was remarkable, especially considering the large number of policy actors involved (states, private actors, regulators). The main jurisdictions played an important role in managing regime complexity, but their effectiveness was constrained by limited domestic coordination. Networks of regulators facilitated international standard-setting and contributed to managing regime complexity through formal and informal tools. The financial industry, at times, lobbied in favour of less precise and stringent rules, engaging in international ‘venue shopping’; other times, it promoted regulatory harmonization and consistency.

State of the Art and Research Design

2020 ◽  
pp. 15-30
Author(s):  
Lucia Quaglia
Keyword(s):  
Political Economy ◽  
International Relations ◽  
Research Design ◽  
Financial Regulation ◽  
International Political Economy ◽  
Analytical Framework ◽  
Capital Requirements ◽  
Empirical Coverage ◽  
Central Counterparties ◽  
Derivatives Markets

This chapter begins by reviewing several bodies of scholarly works that are relevant to this research, notably, the international relations literature on regime complexity and the international political economy literature on financial regulation. It then discusses three mainstream theoretically informed explanations—a state-centric, a transgovernmental, and a business-led accounts—which can be useful to explain how regime complexity in derivatives was dealt with. Finally, it outlines the research design, the analytical framework, the methodology, the sources, the timeframe, and the empirical coverage. Empirically, this book examines all the main aspects concerning the regulation of derivatives markets, namely: trading, clearing and reporting derivatives; resilience, recovery and resolution of central counterparties; capital requirements for bank exposures to central counterparties and derivatives; margins for derivatives non-centrally cleared via central counterparties.

A Decade after Lehman: An Assessment of Key Regulatory Responses to the Global Financial Crisis

2019 ◽  
Vol 16 (4) ◽  
pp. 457-483
Author(s):  
Andreas Kerkemeyer
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Financial System ◽  
Capital Requirements ◽  
Investment Bank ◽  
Over The Counter ◽  
Basel Accords ◽  
Lehman Brothers ◽  
The Global Financial Crisis ◽  
Almost All

In September, 2008, the meltdown of the investment bank Lehman Brothers accelerated the Global Financial Crisis, which affected economies and consumers worldwide. As soon as the Global Financial Crisis broke out, governments and legislators recognized the need for macroprudential reform in order to build a resilient financial system. Today, legislators in every major jurisdiction have finalized almost all major reforms that were envisaged once it had become clear that the crisis was also due to regulatory shortcomings. The reforms especially targeted (over-the-counter) derivatives and the equity base of banks. Following an analysis of the reasons for the Global Financial Crisis and the regulatory failures that contributed to its severity this article will discuss two major legislative responses that intend to make the financial system robust – the establishment of a central dearing obligation for over-the-counter derivatives and the revised Basel Accords on capital requirements for banks.

Controversies Over Clearing: Regulation of Derivatives

2020 ◽  
pp. 129-149
Author(s):  
Scott James ◽  
Lucia Quaglia
Keyword(s):  
Euro Area ◽  
Financial Stability ◽  
International Level ◽  
Over The Counter ◽  
Legal Challenges ◽  
Central Counterparties ◽  
Regulatory Capacity ◽  
The Uk ◽  
European Markets ◽  
Minimal Resistance

UK regulators supported more stringent rules regarding the clearing of over-the-counter derivatives through Central Counterparties (CCPs) on financial stability grounds. Minimal resistance to this came either from elected officials, who paid little attention to the issue, or from the derivatives industry, as many viewed reform as desirable. UK regulators were therefore able to pursue the trading-up of OTCD rules and greater harmonization to manage the cross-border externalities generated by derivatives clearing. At the international level, UK regulators acted as pace-setters to secure more prescriptive standards, leveraging their significant market power and regulatory capacity, based on London’s prominent position. But at the EU level, UK negotiators pursued a strategy of foot-dragging in opposition to European Markets Infrastructure Regulation (EMIR) provisions on the scope, access, and location of CCPs. The UK also used legal challenges to block attempts to relocate the clearing of euro-denominated derivatives to the euro area.

Capital requirements on over the counter options

1997 ◽  
Vol 4 (11) ◽  
pp. 657-660
Author(s):  
Lily Choong
Keyword(s):  
Capital Requirements ◽  
Over The Counter

Clearinghouses Versus Central Counterparties From Margin Calculation Point Of View

2021 ◽  
Author(s):  
Melinda Friesz ◽  
Kata Varadi
Keyword(s):  
Financial Markets ◽  
Point Of View ◽  
Over The Counter ◽  
Margin Requirement ◽  
Central Counterparties ◽  
Calculation Point ◽  
Securities Trading

Clearinghouses and central counterparties (CCPs) have a notable role in financial markets, namely facilitating securities trading and derivative transactions on exchanges and over-the-counter markets. They have to clear the transactions and carry out their settlements to decrease costs and settlement risk. To efficiently carry out this activity, they need to collect adequate collateral from the trading parties as guarantees. Two main elements of these guarantees are the margin requirement and default fund contribution. Our paper focuses on the margin calculations and emphasizes their notable difference in the case of clearinghouses and CCPs. Our main result is that clearinghouses’ margin requirement is better from a procyclicality point of view; however, CCP margining is more prudent based on our results.

Static models of central counterparty risk

2015 ◽  
Vol 02 (02) ◽  
pp. 1550011 ◽  
Author(s):  
Samim Ghamami
Keyword(s):  
Capital Requirements ◽  
Risk Measurement ◽  
Counterparty Risk ◽  
Risk Capital ◽  
Over The Counter ◽  
Otc Derivatives ◽  
Measurement Framework ◽  
Risk Sensitive ◽  
Definition Of ◽  
Novel Applications

Following the 2009 G-20 clearing mandate, international standard setting bodies (SSBs) have outlined a set of principles for central counterparty (CCP) risk management. They have also devised formulaic CCP risk capital requirements on clearing members for their central counterparty exposures. There is still no consensus among CCP regulators and bank regulators on how central counterparty risk should be measured coherently in practice. A conceptually sound and logically consistent definition of the CCP risk capital in the absence of a unifying CCP risk measurement framework is challenging. Incoherent CCP risk capital requirements may create an obscure environment disincentivizing the central clearing of over the counter (OTC) derivatives transactions. Based on novel applications of well-known mathematical models in finance, this paper introduces a risk measurement framework that coherently specifies all layers of the default waterfall resources of typical derivatives CCPs. The proposed framework gives the first risk sensitive definition of the CCP risk capital based on which less risk sensitive non-model-based methods can be evaluated.

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