Increased volume and volatility threatened to overwhelm markets in March and April of last year. 蒂姆周二, 存 Managing Director for Financial and Operational Risk Management, spoke with industry stakeholders at a recent ISDA panel on the role that 存 plays in safeguarding the markets and the impact on CCP risk management frameworks during the COVID crisis.
市场对COVID的反应
While headlines during the broad market event were focused on equity movements, 信贷市场利差扩大, 美国国债价格, 还有金融市场, 有几点基本上没有被注意到. Specifically, cash market volumes increased substantially. “We saw cash equity volumes up two-to-three times historical averages last March. For 2020, volumes were up 50% over historical levels,” Cuddihy said.
清算组合的日内变动是动态的, and during times of stress can become more directional, affecting the ability to net margin requirements and ultimately settlement obligations. Cuddihy noted that these amounts could change dramatically as portfolios become more unbalanced versus business as usual.
While many headlines highlighted the “dash for cash” in the Treasury market, Cuddihy在幕后指出了这一点, 这个问题要复杂得多. “当我们看到危机的数据点时, there was a more significant rotation rather than outright selling. More market participants migrated to the shorter end of the Treasury curve to potentially sell long-dated assets.“vns6060威尼斯城官网流动性, 外国投资者, 包括中央银行, 卖出了大约3000亿美元的国债, 长期债券基金的销售额约为150亿美元, while the Treasury issued around $150 billion during the period. The majority of this activity was absorbed by financing markets, particularly U.S. repos, which expanded pre-Fed intervention by about $400 billion.
Panelists noted that crisis exposed several observations in initial margin models across CCPs. 例如, 围绕交易所交易的衍生vnsr威尼斯城官网登入, 其中包括没有压力期, use of only one-day margin period of risk and insufficient anti-procyclicality measures. These resulted in sizable breaches of initial margin and derivative CCPs increasing their initial margin levels.
"The need to provide more information and increased client engagement during the crisis was crucial."
Post-crisis analysis has identified that rising margin requirements may have squeezed Treasury futures contracts and contributed to selling pressures. 另外, not having access to the margin mechanics was a detriment during the events of last year, as it prevented firms from being able to make predictions. Initial margin levels jumped to unexpected levels and were skewed to the future trades.
关键需求/建议
All panelists noted that business continuity was critical in the crisis and has shown the benefit of investments in operational readiness and resilience.
Cuddihy further discussed that the need to provide more information and increased client engagement during the crisis was crucial. “NSCC increased availability of client margin requirements, 从每小时增加到15分钟, to allow clients to monitor their portfolios more real-time, 并更好地管理他们的曝光率.” 存 also looked at how to provide clients with more tools, including providing the algorithms supporting the initial margin models. Additional support requests for the future include improvements to current disclosures and transparency, as well as the ability to offer margin “what-if” simulators to clients.
Panelists also spoke of how any enhancements to margin models needed to be a cross-border effort and not based on a single jurisdiction to provide enhanced risk protection for clients.
消除市场风险
What are some ways risk can be removed from markets? 存 has been focusing on reducing risk in the settlement cycle, particularly for US equities. Cuddihy spoke about the balance between the length of the settlement cycle and risk, “在任何时候，清算都是少的, 我们需要管理的风险就越小. We are working with industry to find the right balance between the settlement cycle and the benefits of netting.”
Another way to remove systemic risk is to move more into clearing. Additional opportunities for participants to have exposures netted at CCPs would be to both participants and also to those who don’t have access to services, 特别是在国债市场.
注意到随后的危机将如何不同, Cuddihy mentioned the need to work with market participants and industry groups to look at tail risk. Finding the correct information on how various firms manage tail risk and how exposures are aggregated in various areas, 包括大宗经纪安排, 在中央结算银行或双边市场, 是存的重点.
CCP恢复解决方案
Panelist takeaways from the crisis included the need for additional framework and CCPs should be consistent with corporate finance principles. 另外, CCP equity capital should be at risk ahead of end-investors and clearing members' capital.
从恢复和降温的角度来看, Cuddihy指出了存的基石, including the need to manage liquidity resources and provide continuity of its services during a stressful period. At 存, mechanics including early warning and escalation processes are essential. There is a vital need to understand how governance works and the roles of both the Board of Directors and management.