Central Counterparty Clearing

Agenda Program Online
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Available exclusively as online seminar
Price of online training
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Objective is for participants to gain an appreciation and understanding of the following topics:

CCP margin frameworks
The default management process
The loss allocation waterfall
Key issues including: direct clearing, indirect client clearing, portability, segregation
Other related counterparty risk mitigation tools and their limitations
Systemic risk and extreme tail risk
Can a CCP fail? Some historical examples
Stress Testing a CCP and a recovery and resolution plan
Capital requirements for exposures to CCPs
The background and evolution of central counterparty (CCP) clearing
An overview of the evolution of OTC Central Clearing, regulatory initiatives and the implications for the risk landscape

This course is intended to provide an appreciation of central counterparty clearing particularly in relation to the clearing of OTC derivatives. Particular focus will be given to regulatory initiatives to develop the use of CCPs for OTC derivatives clearing following the financial crisis of 2007/8, the risk mitigation mechanisms developed by CCPs in response to the regulatory challenge, in particular: the margin requirements; auction processes; loss allocation methods and of course capital requirements.

The course will also look at the evolution of central clearing and the impact on risk that CCPs may have in future crises, both positive and negative, particularly in relation to counterparty credit risk, XVAs and systemic risk.

The course is intended particularly for risk managers, traders, regulators and anyone involved with clearing systems.

Key Benefits Include:
  • Strictly limited numbers on a first come, first accepted basis
  • Practical exercises to support the sessions
  • Receive an electronic copy of the trainer’s presentation prior to the course
How to manage exposure to CCPs is amongst the biggest unknowns in today’s financial system.

Program of the seminar: Central Counterparty Clearing

09.00 - 09.10 Welcome

09.10 - 12.30


  • What is Central Clearing
  • How does a CCP Work?
  • Direct clearing, client clearing and indirect clearing
  • Margining
  • Default management process
  • Loss mutualisation
  • Regulatory response to the 2008 Financial Crisis

A closer look at Margining

  • Variation Margin
    • Obtaining prices for OTC products
  • Initial Margin
    • SPAN
    • VaR and Expected Shortfall
    • Stressed Loss Add-Ons
    • SIMM
  • LCH, CME and EUREX
  • CDS clearing at ICE
  • Segregation of collateral

12.30 - 13.30 Lunch Break

13.30 - 17.00

A closer look at The Default Management Process

  • Declaring a default
  • Macro Hedging
  • The Auction Process
  • Client Portability

A closer look at Default Funds

  • Sizing the default fund
  • Allocating the default fund to clearing members
  • Default Fund versus margining

Loss Allocation

  • The CCP waterfall and the “defaulter pays principle”
  • Loss allocation methods
    • Powers of Assessment
    • Default Fund tranches
    • Variation Margin Gains Haircutting
    • Trade tear-up
    • Forced Allocation
    • IM haircutting, novation to other CCPs, reversion to bilateral trades, CCP wind-up

Client Clearing

  • The client clearing models - clearer or client?
  • Portability
  • Segregation of collateral - Omnibus or ISA accounts - LSOC and EMIR

09.00 - 12.30

Can a CCP fail?

  • Some historical examples - including Nasdaq's Nordic power market
  • Extreme tail risk and systemic risk
  • Stress Testing a CCP
  • Recovery and Resolution of a CCP
  • Risk Transformation, the effects a CCP has on the risk landscape


  • Evolution
  • Conundrums
  • SwapAgent

Overview of Counterparty Risk

  • The nature of Counterparty risk
  • Mitigation methods
  • How does a CCP help?
    • Netting
    • Trade Compression
    • Margining/default Funds
    • Standards for clearing members
    • Legal certainty
    • Default Management Procedure


  • CVA: Credit Valuation Adjustments
  • DVA: Debit Valuation Adjustments
  • BCVA: Bilateral CVA
  • FVA: Funding Valuation Adjustments
  • MVA: Margin Valuation Adjustments
  • KVA: Capital Valuation Adjustments
  • ColVA

12.30 - 13.30 Lunch Break

13.30 - 17.00

Capital Requirements for exposures to a CCP

  • Earlier regulatory proposals
  • BCBS 282
    • Trade exposures
    • Default fund contribution capital requirements
  • CCP Basis Risk
  • Calculating EAD for regulatory capital
    • CEM
    • Standardised Approach for Counterparty Credit Risk (SA-CCR)
    • IMM

CCP Basis Risk

Evolution of Clearing

  • Early trading and clearing platforms
  • Complete and incomplete clearing
  • The ETD and OTC derivative markets
  • The 2008 crisis
  • Political and regulatory responses, IOSCO and the G20Clearing Mandate, Dodd Frank, EMIR, OTC regulation, Basel III, IFRS13

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