FIA has updated its CCP Tracker visualizations with data from the first quarter.
The CCP Tracker visualizations show risk-related metrics for 15 clearinghouses side by side for each quarter going back to 2015. The metrics include initial margin, default funds, margin breaches, stress losses and concentration ratios. The data were obtained from the public quantitative disclosures published by the clearinghouses, which are generally released two or three months after the end of the quarter.
Highlights of the first quarter:
Initial margin functions as the first line of defense in case of a default. In the first quarter,
- LCH Ltd. had the highest IM requirement, with $254.8 billion at quarter-end. Approximately 56.3% of that amount was deposited by clearing firms on behalf of their clients, with the remainder for house accounts.
- CME Clearing had the second largest amount of initial margin, with $224.5 billion at quarter end. Of that amount, 84.5% was deposited on behalf of clients.
- Eurex Clearing was third with $116.5 billion at quarter-end.
- ICE Clear Europe was fourth with $102.1 billion at quarter-end.
- OCC was fifth with $74.8 billion at quarter-end.
Taking the view down to the service level:
- The interest rates clearing service at LCH Ltd. had the highest amount of margin, with more than $229.4 billion at quarter-end, up from $204.6 billion at year-end.
- CME's "base" clearing service, which covers listed futures and options across several asset classes, had more than $188.7 billion in initial margin at quarter-end, up from $173.3 billion at year-end.
- Eurex Clearing provided the most granular breakdown of initial margin by clearing service, with data on nine different sets of products. Among these, Eurex Clearing’s OTC IRS service reported the highest initial margin requirement with €55.0 billion at quarter-end, down from €59.4 billion at year-end .
The default fund functions as a backstop in case a clearing member is unable to meet its obligations and their initial margin proves insufficient. Most default funds rely primarily from contributions from member firms, with some additional funding provided by the clearinghouse itself.
- OCC had the highest amount of member contributions to its default fund, with $14 billion at the end of the quarter.
- LCH Ltd. was second with $8.6 billion.
- CME was third with $7.4 billion.
- LCH SA was fourth with $6.6 billion.
Many clearinghouses contribute their own funds, called "skin in the game", to an initial layer of protection that absorbs losses before the default fund is used.
- CME contributed the largest amount to this initial layer, with $250 million deposited in the default fund across its two clearing services at the end of the first quarter.
- Australia’s ASX was second with a combined $248 million across its two clearing services.
- ICE Clear Europe was third with $247 million.
- Japan’s JSCC was fourth with $208 million.
The FIA CCP Tracker includes data on the largest margin breach over the prior 12 months. Margin breaches are measured at the member level, not the customer level, and represent the potential exposure to losses not covered by initial margin (i.e. where variation margin losses exceed the initial margin requirement for a particular member).
The largest margin breach over the 12 months ending in March was reported by LCH Ltd. That breach was £924.4 million in its fixed income service. LCH Ltd. also reported the second highest margin breach, £698.1 million in its interest rates clearing service. The third highest breach occurred at JSCC in its clearing service for Japanese government bonds with ¥62.1 billion (equivalent to $466 million at quarter-end).
CME had the lowest margin breach relative to other large CCPs. The peak margin breach reported in its first quarter disclosure was $11.2 million for its "base" clearing service, which covers its exchange-traded futures and options. This was higher than the amount disclosed in the previous four quarters, meaning that this breach occurred in the first quarter of 2023.
This section of the FIA CCP Tracker shows data on stress losses, which are defined as a CCP's estimate of the potential loss in case of a default by a single member and by two members at the same time.
- OCC reported the largest stress loss estimate: $5.5 billion in case of a single default and $7.5 billion in case of a double default.
- Eurex was second, with $2.8 billion and $5.1 billion, respectively.
- CME’s base clearing service had the third largest estimated loss exposure, with $3.4 billion and $4.1 billion in case of a single and a double default, respectively.
- LCH's interest rate service was fourth, with $2.1 billion and $4.1 billion, respectively.
FIA also calculates the ratio of the stress loss to the default fund as a way to gauge how much of the loss the surviving clearing members might have to absorb.
ICE's clearing services for credit default swaps had the lowest ratios of a single exposure to the default fund, just 0.4 for the CDS clearing service at ICE Clear Europe and 0.5 for ICE Clear Credit in the US. ICE's futures and options clearing services also had relatively low ratios, 0.6 for ICE Clear Europe and 0.5 for ICE Clear US.
At the other end of the spectrum, the three clearing services operated by Hong Exchanges and Clearing -- SEOCH, HKCC, and OTC Clearing -- had ratios of 1.1, 1.3, and 1.8 respectively. Eight of JSCC’s clearing services exhibited ratios greater than 1. In particular, the agriculture, rubber, and petroleum services had high ratios, with ratios of 2.1, 2.1, and 16.9 respectively.
This section of the FIA CCP Tracker includes data on the number of general clearing members at each clearinghouse. General clearing members, also known as futures commission merchants in the US, are those members that provide clearing for clients and affiliates. Some clearinghouses also have direct members that clear only their own positions.
- OCC reported the highest number of general clearing members with 112 at the end of the first quarter.
- Eurex was second with 84 members.
- JSCC's bond futures and options service was third with 82 members.
- JSCC’s index futures and options service was fourth with 69 members.
- LCH Ltd.’s interest rates clearing service and ICE Clear Europe’s futures and options clearing service were both fifth with 62 members.
The CCP Tracker also includes data on concentration ratios, i.e., the ratio of initial margin held by the top five members. The following table shows the IM concentration ratios during the first quarter for a sample set of CCPs.
- 69.4% CME OTC IRS
- 62.3% CME Base F&O
- 36.9% Eurex
- 44.9% ICE Clear Europe F&O
- 65.3% JSCC IRS
- 25.2% LCH Ltd Interest Rates
- 69.5% Nasdaq Commodities
- 55.0% OCC
- 49.4% SGX Derivatives
