SEC Greenlights Nerdier Math for Swap Risks
Published Date: 12/18/2025
Notice
Summary
ICE Clear Credit (ICC) is updating how it manages risks and figures out end-of-day prices for credit default swaps. These changes aim to make the system safer and more accurate without changing the official rules. The updates kick in soon and could affect how much money firms need to keep on hand to cover risks.
Analyzed Economic Effects
2 provisions identified: 1 benefits, 1 costs, 0 mixed.
Higher IM for CDS Index Positions
ICC proposes to calculate the liquidity charge for credit default swap (CDS) index instruments using Level III bid-offer widths (BOWs) for both long and short protection positions instead of using Level II for long and Level III for short. The liquidity charge is a component of the Initial Margin (IM) requirement, so this change could increase the amount of money Clearing Participants must hold to cover CDS index portfolios.
Strengthened Clearinghouse Risk Protections
ICC says the revisions will simplify and strengthen its risk management documentation and liquidity-charge methodology, which is intended to promote prompt and accurate clearance and settlement and to help safeguard securities and funds. ICC states these changes are designed to protect investors and the public interest by promoting the soundness of its risk framework.
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