Clearing thresholds: Difference between revisions
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So in this new world where derivatives are finally seen as the [[weapons of mass destruction]] that Warren Buffett always said they were, the regulators have announced that, over certain thresholds, parties trading [[over-the-counter]] derivatives must clear them through a [[CCP|central clearing counterparty]], and | So in this new world where derivatives are finally seen as the [[weapons of mass destruction]] that Warren Buffett always said they were, the regulators have announced that, over certain thresholds, parties trading [[over-the-counter]] derivatives must clear them through a [[CCP|central clearing counterparty]], and [[mark-to-market]] exposure arising from those types of derivative which cannot be (or are not) centrally cleared must be fully collateralised. | ||
Thus the grand excitement, culminating in the first quarter of 2017, of [[variation margin regulation]] (call it [[WGMR]], [[SIMM]], [[UMR]] - whatever the hell you like). | Thus the grand excitement, culminating in the first quarter of 2017, of [[variation margin regulation]] (call it [[WGMR]], [[SIMM]], [[UMR]] - whatever the hell you like). | ||
Revision as of 16:29, 4 May 2018
So in this new world where derivatives are finally seen as the weapons of mass destruction that Warren Buffett always said they were, the regulators have announced that, over certain thresholds, parties trading over-the-counter derivatives must clear them through a central clearing counterparty, and mark-to-market exposure arising from those types of derivative which cannot be (or are not) centrally cleared must be fully collateralised.
Thus the grand excitement, culminating in the first quarter of 2017, of variation margin regulation (call it WGMR, SIMM, UMR - whatever the hell you like).
Financial counterparties
Er -
Non-financial counterparties
EMIR identifies two sub-categories of Non-Financial Counterparties (“NFC”).
Depending on the volume of derivatives a counterparty enters into, ESMA (European Securities and Markets Authority) has defined a set of clearing thresholds for each class of derivative and NFCs are classified relative to these thresholds.The calculation is based on gross notional values of positions (excluding cash products and spot FX that are ‘objectively measurable as reducing risks directly related to its commercial activity or treasury financing activity or that of its group (‘hedging derivatives’).