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Topic: Counterparties

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	[No title] (Site not responding. Last check: 2007-10-29)
		Because counterparties have the potential to lose money when trades do not clear because of subsequent changes in market conditions, counterparties frequently desire to, and are frequently required by their parent entities to, limit their risk exposure.
		view and edit whether the counterparty has a parent entity 440 and, if so, view and select the name of the parent entity 442, and view the last date the information for the counterparty was modified 444 and the name of the operator that last modified the information 446.
		Interface 1300 may list all account level limits for a counterparty in list 1302, the counterparty level limits for the counterparty in region 1304, and accounts which do not have their own limits and which are therefore subject to the counterparty level limits for the counterparty.
	www.wipo.int /cgi-pct/guest/getbykey5?KEY=01/50329.010712&ELEMENT_SET=DECL (6644 words)

	THE SINGLE MONETARY POLICY IN STAGE THREE
		Counterparties' tender bids must be in a form that follows the pro forma example provided by the national central banks for the relevant operation.
		Counterparties are expected always to be in a position to cover their tender bids by a sufficient amount of eligible underlying assets.
		Counterparties without a safe custody account with a national central bank or a securities settlement account with a securities depository easily accessible to the relevant national central bank may settle the transactions of underlying assets through a securities settlement account with a custodian.
	www.uni-siegen.de /~vwlii/auwipol/EMI/tabt08_6.htm (3968 words)

	[No title]
		Specifically, if derivatives contracts are "netting contracts" (e.g., the ISDA Master Agreements) negotiated between two "financial institutions," the provision guarantees counterparties the right to terminate their contracts upon the appointment of a receiver.
		Solvent counterparties using derivatives to hedge would have to decide whether or not to replace their possibly-repudiated contracts.
		If contracts are transferred to an institution which does not meet with the approval of the solvent counterparties, the latter may be forced to assume credit risk which they otherwise would have avoided.
	www.rkba.org /libertarian/cei/derivatives (1390 words)

	FCA Info Memo - Counterparty Risk
		However, over-reliance on a single counterparty is risky and could adversely impact the safety and soundness of an institution.
		Counterparty risk derives from the exposure to a single party in a financial transaction.
		Actions to mitigate your exposure in the event the financial condition of a counterparty deteriorates and doubts arise about its ability to perform in accordance with the agreements and contracts you have executed.
	www.fca.gov /apps/infomemo.nsf/0/21eb946f2c2402f485256dc8004c9dc4?OpenDocument (782 words)

	THE SINGLE MONETARY POLICY IN STAGE THREE
		Counterparties must fulfil any operational criteria specified in the relevant contractual or regulatory arrangements applied by the respective national central bank (or the ECB), so as to ensure the efficient conduct of ESCB monetary policy operations.
		The range of counterparties to foreign exchange swaps corresponds to the counterparties located in the euro area which are selected for ESCB foreign exchange operations.
		If the ECB were to carry out bilateral operations, the selection of counterparties would in such cases be made by the ECB according to a rotation scheme among those counterparties in the euro area which are eligible for quick tenders and bilateral operations in order to ensure equitable access.
	www.uni-siegen.de /~vwlii/auwipol/EMI/tabt08_3.htm (854 words)

	Federal Reserve Bulletin: U.S. Bank Exposure to Emerging-Market Countries during Recent Financial Crises - Statistical ...
		Counterparty credit risk relates to the inability of a counterparty to repay and may arise from country-specific factors, such as general economic or political disruptions; for example, a sharp recession in a foreign country might cause a foreign counterparty to go bankrupt.
		Total claims on counterparties in developed countries and banking centers rose in the aggregate, from $485 billion to $572 billion (an increase of 18 percent).(5) Cross-border claims rose at about the same pace as local claims and generally represented two-thirds of total claims on developed countries and banking centers over the period.
		In contrast, combined cross-border and local claims on counterparties in emerging-market countries fell from $195 billion to $183 billion, a 6 percent drop.(6) Cross-border claims fell significantly over the period, from $108 billion to $88 billion, while local claims rose 9 percent, from $87 billion to $95 billion.
	www.findarticles.com /p/articles/mi_m4126/is_2_86/ai_60060220 (827 words)

	[No title] (Site not responding. Last check: 2007-10-29)
		Generally, counterparty credit limits are set for each bank or each trading floor and the host computer establishes a gross counter party credit limit for each possible pair of counterparties.
		In a preferred embodiment the identity of the counterparty to a deal is displayed at the trader's terminal together with an identification of the actual counterparty trader, a further trade is initiated by selecting a completed deal and sending a further trade'request message across the network.
		If one of the counterparties would like to deal further with that particular trader, at the same price, they would not normally deal though an anonymous trading system as, by definition, that system does not permit the identity of the counterparty to be known.
	www.wipo.int /cgi-pct/guest/getbykey5?KEY=01/98966.011227&ELEMENT_SET=DECL (6810 words)

	Comments of J.M. Liftin and R.S. Blanc on S7-30-97: OTC Derivatives Dealers
		It is of course the case that financial soundness of counterparties is an important element in the derivatives markets, particularly given the extended period of time unsecured derivatives obligations can be outstanding, but financial soundness of a counterparty is not synonymous with the liquidity-based concept that underlies the net capital rule.
		Obligations owed by derivatives counterparties to one another are not much different in substance from other financial obligations that reside in loan documents, debentures, other obligations for borrowed money and other commitments that contemplate future performance.
		In the case of OTC derivatives, where there is not the credit of a registered clearing corporation to rely on, the creditworthiness of the counterparty, at the time the relationship is created and at the time the transaction is concluded, are essential to the success of the transaction.
	www.sec.gov /rules/proposed/s73097/liftin6.htm (2339 words)

	Hedge Funds, Leverage and the Lessons of Long-Term Capital Management: Report of the President's Working Group on ...
		Thus, counterparties that were relying on variation margin to manage credit risk were left with the unsatisfactory prospect of liquidating collateral and closing out exposures in a declining market.
		The LTCM Fund's counterparties and creditors were facing the risk posed by the impact of a default by the LTCM Fund in the unusual market environment prevailing in late September.
		The LTCM Fund's counterparties would have had to manage the effects of the direct credit losses from the default as well as further indirect effects if the default accelerated a flight to safety and liquidity that was already occurring.
	www.cftc.gov /tm/tmhedgefundreport.htm (13443 words)

	Derivative security -- Facts, Info, and Encyclopedia article (Site not responding. Last check: 2007-10-29)
		This means that a bank’s obligation, in the event of the default or insolvency of one of the parties, would be the net sum of all positive and negative fair values of contracts included in the bilateral netting arrangement.
		This represents the maximum losses the bank’s counterparties would incur if the bank defaults and there is no netting of contracts, and no bank collateral was held by the counterparties.
		This represents the maximum losses a bank could incur if all its counterparties default and there is no netting of contracts, and the bank holds no counterparty collateral.
	www.absoluteastronomy.com /encyclopedia/d/de/derivative_security.htm (2135 words)

	Administration of Relationships with Foreign Exchange Counterparties - Federal Reserve Bank of New York (Site not responding. Last check: 2007-10-29)
		Taking into account these developments, the FRBNY is updating the criteria for eligibility and performance as a foreign exchange counterparty, with the continued objectives of effectively conducting transactions in the foreign exchange market and gathering information that is useful to the U.S. monetary authorities.
		Counterparties are expected to maintain a dialogue with the trading desk and to provide access to the expertise within their firms.
		Under the eligibility guidelines set forth in 1992, trading counterparties were required to be either commercial banking organizations subject to official supervision by U.S. Federal bank supervisors or broker/dealers registered with the Securities and Exchange Commission.
	www.ny.frb.org /markets/fxop_policies.html (822 words)

	Federal Reserve Bulletin: U.S. Bank Exposure to Emerging-Market Countries during Recent Financial Crises - Statistical ... (Site not responding. Last check: 2007-10-29)
		In Russia, the precipitous fall in cross-border claims was driven largely by a 92 percent decline in claims on the public sector, representing a default by the Russian government on its foreign-currency bonds in August and September 1998.
		On the whole, the maturity distribution of crossborder claims on counterparties in emerging-market countries indicates the continued prevalence of short-term credits.(13) For example, the share of cross-border claims with a maturity of one year or less held steady over the period, accounting for two-thirds of crossborder claims.
		For example, even though total claims on counterparties in Latin America registered double-digit growth, that growth rate was outpaced by that of the reporting banks' total assets, thus driving the percentage of claims-to-assets for that region lower.
	www.findarticles.com /p/articles/mi_m4126/is_2_86/ai_60060220/pg_6 (956 words)

	Netting (Site not responding. Last check: 2007-10-29)
		Payment netting reduces settlement risk: If counterparties are to exchange multiple cash flows during a given day, they can agree to net those cash flows to one payment per currency.
		In the event that a counterparty defaults, or some other termination event occurs, the outstanding contracts are all terminated.
		Because credit exposure to each counterparty is spread across all participants, there is less incentive for each participant to scrutinize the credit worthiness of each other counterparty.
	www.contingencyanalysis.com /glossary/articles/netting.htm (694 words)

	NCFS Note 5, and Note 6
		Presented below is a summary of counterparty credit ratings for the replacement cost (net of $2,186 collateral) of trading derivatives in a gain position by maturity at December 29, 1995.
		Receivable and payable balances with the same counterparty in the same maturity category, however, are net within the maturity category.
		The total exposure to these counterparties, excluding collateral held, was $3,642 or 2.1% of total assets.
	www.ml.com /annualmeetingmaterials/annrep95/notes3.htm (1789 words)

	FRB: Supervisory Letter SR 99-3 (SUP) on supervisory guidance regarding counterparty credit risk management--February ...
		Are moving in a timely fashion to enhance their measurement of counterparty credit risk exposures, including the refinement of potential future exposure measures and the establishment of stress testing methodologies that better incorporate the interaction of market and credit risks.
		While such information may be adequate for many types of counterparties, it may be entirely insufficient for those counterparties where off-balance sheet positions are a source of significant leverage and where risk profiles are narrowly based on concentrated business lines, such as with hedge funds and similar institutional investors.
		Such analyses is particularly important in cases where a counterparty's creditworthiness may be adversely affected by short-term fluctuations in financial markets and especially in situations where potential credit exposure to a counterparty increases at the same time the counterparty's credit quality deteriorates.
	www.federalreserve.gov /boarddocs/SRLETTERS/1999/SR9903.HTM (4699 words)

	FRB: Federal Reserve Board Testimony from 03/24/1999
		Banks are also moving to develop more realistic counterparty credit risk exposure measures including the development of various types of stress testing of their credit risk exposures to major counterparties.
		With regard to the assessment of counterparty creditworthiness, the guidance points out the need for policies and procedures that are tailored to the risk profiles of counterparties and for internal controls that ensure actual practices conform with these policies.
		It could be argued that, to a large extent, the fundamental principles of assessing counterparty credit risks, the measuring and stress testing of the potential future exposures of derivative positions, and the dangers of over-reliance on collateral have been well documented in supervisory guidance for several years.
	www.federalreserve.gov /boarddocs/testimony/current/19990324.htm (4080 words)

	EH.Net Encyclopedia: A History of Futures Trading in the United States
		The clearinghouse is the counterparty to every trade – its members buy every contract that traders sell on the exchange and sell every contract that traders buy on the exchange.
		The futures contact is an efficient form of collateral because it costs only a fraction of the inventory’s value, or the margin on a short position in the futures market.
		Speculators make the hedge possible because they absorb the inventory’s price risk; for example, the ultimate counterparty to the inventory dealer’s short position is a speculator.
	eh.net /encyclopedia/?article=Santos.futures (7660 words)

	FRB: Testimony, Parkinson -- Progress report by the President's Working Group on Financial Markets -- December 16, 1998
		The most important counterparties were banks and securities firms subject to prudential oversight by banking regulators or by the Securities and Exchange Commission (SEC).
		Moreover, the weaknesses in risk management practices that were evident in the counterparties' relationship with LTCM were also evident, albeit to a lesser degree, in their dealings with other highly leveraged firms.
		In LTCM's case, counterparties obtained information from LTCM that indicated that it had securities and derivatives positions that were very large relative to its capital.
	www.federalreserve.gov /boarddocs/testimony/1998/19981216.htm (1402 words)

	ABA Banking Online
		And, ultimately, the counterparties and correspondents of large banks will have to understand the novel ways that bank managers will use to employ their capital, not least to draw timely conclusions about the relative efficiency of these huge financial organizations.
		For the counterparties that pose an important exposure for us, we talk to their managements at the time they are dealing with market changes.
		If it turns out that a counterparty you expected to thrive in a particular environment is having a problem, then that tells you that your information about their strategy and management style was wrong.
	www.ababj.com /webonly/viewnews.cgi?category=5&id=1048042849 (2140 words)

	2001 ISDA Credit Support Protocol
		These market events necessitated a re-consideration of the credit support documentation and members determined that tightening the timeframes in the documentation, as well as streamlining the dispute resolution procedures and refining the terminology in the documentation was necessary.
		Parties that have a significant number of credit support arrangements outstanding with counterparties may find the Protocol a useful means of affecting amendments to those existing arrangements.
		Parties are encouraged to contact their counterparties directly if they require such evidence for their files.
	www.isda.org /protocol/credit_faq.html (2508 words)

	A.G. Edwards, Inc. 2001 Annual Report
		The risk of loss on unsettled transactions is identical to that of settled transactions and relates to customers’ and other counterparties’ inability to fulfill their contracted obligations.
		In the event customers or other counterparties, such as broker-dealers or clearing organizations, fail to satisfy their obligations, the Company may be required to purchase or sell financial instruments in order to fulfill its obligations at prices that may differ from amounts recorded in the consolidated balance sheet.
		To the extent these counterparties are unable to fulfill their contracted obligation to return securities pledged, the Company is exposed to the risk of obtaining securities at prevailing market prices to meet its customer obligations.
	www.agedwards.com /annualrpt/ar01/notes_10.html (604 words)

	Bank of England Quarterly Bulletin: Bank of England's operations in the sterling money markets, The (Site not responding. Last check: 2007-10-29)
		The Bank's present main counterparties are the discount houses, all of which are active participants in the bill and/or gilt repo markets.
		There will be no requirement for the Bank's money-market counterparties to be separately capitalised or specialist entities, and there will be no special supervisory arrangements for counterparties per se; prudential oversight of their activities as a whole will remain with their existing supervisor.
		There is no presumption that all potential money-market counterparties must be ready to participate by the start date: the Bank will be prepared to take on new counterparties which fulfil the criteria at any time.
	www.findarticles.com /p/articles/mi_qa3774/is_199702/ai_n8755540 (1001 words)

	The Central Bank & Financial Services Authority of Ireland : Financial Market Operations : Counterparties & Eligible ...
		In order to be an eligible counterparty for monetary policy operations, a credit institution must be subject to the Eurosystem's minimum reserve system and be financially sound.
		In addition, counterparties must fulfil any operational criteria specified in the regulatory arrangements applied by their NCB, or the ECB, so as to ensure the efficient conduct of Eurosystem monetary policy operations.
		The Eurosystem has limited the group of counterparties for fine-tuning operations and structural operations to counterparties that are active players in the money market.
	www.centralbank.ie /fmo_coun.asp (454 words)

	The Depository Trust & Clearing Corporation - @DTCC - Global Conference on Central Counterparties (Site not responding. Last check: 2007-10-29)
		In a newly released white paper, Central Counterparties: Development, Cooperation and Consolidation, DTCC announced plans to sponsor a global conference to begin to address these issues with major industry players from the Americas, Asia and Europe.
		A central counterparty is a specialized clearing institution that facilitates securities trading by standing between buyers and sellers to ensure that money and securities change hands smoothly and efficiently.
		A copy of the new White Paper on central counterparties is available on the DTCC Web site at www.dtcc.com under "White Papers." Hard copies of the paper are available by e-mailing a request to info@dtcc.com.
	www.dtcc.com /Publications/dtcc/oct00/global.html (594 words)

	ECB Public Consultations - Measures to improve the collateral framework of the Eurosystem
		To ensure an equal treatment of Eurosystem counterparties and to avoid segmentation of collateral across countries, the Eurosystem ensures the possibility for counterparties to use collateral cross-border for all eligible assets and across the entire euro area.
		All tier one assets may be used in a cross-border context, implying that a counterparty can receive credit from the national central bank of the Member State in which the counterparty is established by making use of tier one instruments located in another Member State (see Section 6.6).
		20) In the event that a counterparty is using assets that, owing to an identity with the issuer/guarantor or the existence of close links, it may not or no longer use to secure an outstanding credit, it is obliged to immediately notify the relevant national central bank thereof.
	www.bportugal.pt /euro/consultas/2003/pc_op_credito_e.htm (3638 words)

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