SEC Approves Snooze-Worthy Risk Tweaks for Credit Clearing
Published Date: 5/7/2025
Notice
Summary
ICE Clear Credit LLC (ICC) got the green light to update how it sets and reviews the rules that keep financial risks in check when clearing credit contracts. These changes help ICC better manage money safety for its members, with no extra costs or delays expected. This means safer trading for everyone involved, starting right away!
Analyzed Economic Effects
3 provisions identified: 2 benefits, 1 costs, 0 mixed.
Single-name MADs Updated Daily
ICC will automatically update the risk management mean absolute deviation (MAD) parameters for CDS single-name risk factors daily instead of at least monthly. This change is approved as of May 1, 2025 and is intended to capture rapid single-name market changes and reduce procyclicality in margin calculations.
Index Option APC Calibration Strengthened
ICC expanded and clarified its anti-procyclical condition (APC) calibration for CDS index options, adding asynchronous scenario details and changing how index option underlying price dislocation factors are determined (from a static value to a ratio between peak price decreases and increases). The changes are part of the approved rule revisions filed March 12, 2025 and approved May 1, 2025.
MaxLoss Made More Conservative
ICC revised its risk factor level MaxLoss calculations to make the CDS index and single-name MaxLoss boundary conditions more stable and conservative by (a) considering combined CDS index and index option portfolio loss responses (eliminating index-only components) and (b) incorporating extreme price moves for single names. These revisions were approved May 1, 2025.
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