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Market Risk Management

FICC’s Trade Guarantee

Market risk management is the foundation supporting FICC’s trade guarantee to members.

As central counterparty, FICC:

  • serves as buyer for every seller, and seller for every buyer, for settlement purposes.
  • ensures completion of trades if one of the trading partners defaults.
  • through multilateral netting, significantly reduces (i) security movements, (ii) value of trade obligations requiring settlement, and (iii) capital requirements.
FICC Trade Guarantee

The FICC Market Risk Team

The FICC Market Risk team monitors risks presented to FICC by its clearing members.

Monitoring takes a variety of forms, including:

  • start of day and intraday (hourly) Clearing Fund assessment and collection.
  • daily margin and collateral backtesting and stress testing.
  • market and portfolio risk monitoring; including cycle over cycle exposure, projected liquidity sufficiency and indirect participant activity.
FICC Market Risk

FICC’s Clearing Fund

FICC’s Clearing Fund provides a liquidity and loss resource in the event of a member default. Clearing Fund Requirements are calculated and collected daily based on each member’s net unsettled positions.

Some key components of the Clearing Fund Requirement include:

  • Value at Risk (VaR) volatility charge which uses (i) a 3-day liquidation horizon – i.e., the estimated length of time to liquidate or hedge a defaulted member’s portfolio – and (ii) a 99% confidence interval.
  • Portfolio Differential (PD) an exponentially weighted moving average of the increase in a member's VaR charge calculated twice each business day to address portfolio variability risk.
  • Margin Liquidity Adjustment (MLA) margin liquidity adjustment which addresses FICC’s risk of cost increase from liquidating a defaulted member’s concentrated portfolio.
FICC Market Risk
LEARN MORE ABOUT FICC

GSD Resources

GSD Clearing Fund Methodology

GSD Clearing Fund Methodology

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GSD Haircut Schedule

GSD Haircut Schedule

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GSD Schedule of MLA Charge Asset Groups and Subgroups

GSD Schedule of MLA Charge Asset Groups and Subgroups

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Schedule of Indicative Haircut Rates and Risk Factor Rates

Schedule of Indicative Haircut Rates and Risk Factor Rates

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Schedule of Indicative Haircut Rates and Risk Factor Rates

Treasury Clearing

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MBSD Resources

MBSD Haircut Schedule

MBSD Haircut Schedule

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MBSD Schedule of MLA Charge Asset Groups and Subgroups

MBSD Schedule of MLA Charge Asset Groups and Subgroups

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Useful Resources

Learning Center

Important Notices

Regulatory Rule Filings

By-Laws, Rules, Procedures

CPMI-IOSCO Disclosures

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