OFR_2016_Financial-Stability-Report

One measure of a CCP’s liquidity adequacy is the ratio of total liquid
margin to the average daily variation margin payments. The data show that
the amount of liquidity far exceeds average daily needs. The ratio varies
among U.S. CCPs from 35 to 101 times. A stricter measure is the ratio of
total liquid margin to the peak variation margin payment in the previous 12
months. That ratio ranges from 14 to 28 among U.S. CCPs. (OCC did not
report the peak amount of variation margin payments.)
Counterparty concentration. CCPs face the risk that their outstanding
exposures become concentrated in one or a few large counterparties. This
concentration would pose potential systemic risks, in the event of default of
a large clearing member, because mutualized losses on these exposures are
transmitted elsewhere in the financial system and because the unwinding of
large, concentrated positions aggravates market volatility.
The disclosure data provide new but limited information about the
degree of concentration in CCPs. Figure 50 shows that the largest five
clearing members accounted for roughly half of outstanding exposures at
most clearing services. That ratio was 27 percent for SwapClear, whose members
are mainly dealers in the interest rate swap market. The figures show
aggregate margin amounts for the five largest firms on an average daily and
peak day basis. The peak amounts differ little from those of the average. This
implies that the largest five firms do not change position sizes much or that
they do not change them much more than others in the market. The absence
of a large difference between these figures mitigates concerns about the
potential for concentration risk to intensify when markets become volatile.
Data shortcomings. Some problems with the data are typical of new
reporting standards. The CCPs left many elements blank. Inconsistent
responses among CCPs show that some fields are still open to interpretation.
This ambiguity limits comparisons among CCPs. For example, CCPs
inconsistently reported the average daily volume and average daily outstanding
amounts of cleared transactions. CCPs’ reported total figures are
not always consistent with other data sources that measure market activity.
Also, not all reported items refer to the same range or point in time, making
it difficult to answer key questions. For example, CCPs must report the
largest estimated stressed losses from the previous 12 months, but they
report available default resources only at the end of each quarter.
These incomplete and inconsistent disclosures may reflect the failure
to use a common readable file template. They may also reflect differences
in interpretation that result in inconsistencies in the choice of reporting
forms, field identifiers, levels of aggregation, interpretation of definitions, or
completeness of reporting figures. In some cases, disclosures refer to external
documents that may be hard to locate. Some of these inconsistencies may
Key Threats to Financial Stability 55