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Tag Archive: Clearing house (finance)


3/52 : Dommages collatéraux - Collateral damage

I did this post last year but the essence is clearly visible now so posting it again under new rules and regulations.

Deja vu all over again, the over-reliance on ‘shaky’ collateral and concentration of risk is building once more – this time in the $648 trillion derivatives market. New Clearing House rules (a la Dodd-Frank) mean derivatives counterparties are required to pledge high quality collateral with the clearing houses (or exchanges) in a more formalized manner to cover potential losses.  Continue reading

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OTC Derivatives Market

Size is too simple a metric… It really doesn’t matter from a systemic point of view whether you have four banks or forty banks in a market. It’s813530 the system’s asset concentration – principally in government debt and in mortgage debt – that can be dangerous.”

Thought of sharing some Important glossary on the OTC Market as I was refreshing self on last night :

I did this post last year but the essence is clearly visible now so posting it again under new rules and regulations :-images

Deja vu all over again, the over-reliance on ‘shaky’ collateral and concentration of risk is building once more – this time in the $648 trillion derivatives market. New Clearing House rules (a la Dodd-Frank) mean derivatives counterparties are required to pledge high quality collateral with the clearing houses (or exchanges) in a more formalized manner to cover potential losses.

However, the safety bid combined with Central Banks monetization of every sovereign risk asset onto their balance sheet has reduced the amount of quality collateral available; this scarcity of quality collateral creates liquidity problems. Continue reading

In a recently concluding submit at Risk‘s OTC Derivatives Clearing Summit in New York. Representatives from Goldman imagesSachs argued that :

“Regulators want capital and margin rules to encourage central clearing, but analysis suggests costs may currently be higher in the cleared world”

So what does he mean let’s try to look at the existing capital and margin rules may not encourage market participants to centrally clear their over-the-counter derivatives trades. The capital regime for both cleared and uncleared trades is still unsettled, as is the margin regime for transactions that remain bilateral, but regulators are keen to ensure the framework pushes trades towards central counterparties (CCPs). As things stand,costs may be higher in the cleared world, particularly for market participants that have a directional book of trades. Continue reading

Collateral Damage (film)

Deja vu all over again, the over-reliance on ‘shaky’ collateral and concentration of risk is building once more – this time in the $648 trillion derivatives market. New Clearing House rules (a la Dodd-Frank) mean derivatives counterparties are required to pledge high quality collateral with the clearing houses (or exchanges) in a more formalized manner to cover potential losses.

However, the safety bid combined with Central Banks monetization of every sovereign risk asset onto their balance sheet has reduced the amount of quality Continue reading

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