Trade exposures with CCPs - CRR Provision: Difference between revisions
Jump to navigation
Jump to search
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
Line 8: | Line 8: | ||
===The BIS Paper=== | ===The BIS Paper=== | ||
The BIS paper is predicated on the US [[FCM]] model where a [[clearing member]] or [[intermediate broker]] acts at all times as [[agent]]. It is in the nature of a [[disclosed agent|disclosed agency]] that the [[agent]] is not personally liable to perform of the contract, and does not therefore have credit risk to persons who are. Thus: | |||
*The starting assumption is that when finally executed, the parties to a futures contract are the client and the [[CCP]]. The intermediate entities are all agents and thus not responsible for performance of the contract. Therefore an intermediate broker’s performance and creditworthiness is not really a concern to an executing broker; | |||
*It would be most unusual for the executing broker to take any risk on the CCP, so it would only have to apply a risk-weighting against the CCP where it has actually guaranteed the CCP’s performance. This would be unusual, so the default assumption is that no risk weighting would apply. | |||
===This talks about [[CCP]]s. What about [[intermediate broker|intermediate brokers]]?=== | ===This talks about [[CCP]]s. What about [[intermediate broker|intermediate brokers]]?=== |