MRAC

July 21, 2020

Observations on CoVid’s impact to Margin, Processing, Operational 

Health in Cleared Derivatives - A CCP perspective

Lee Betsill, CRO CME Group
CCPs have successfully demonstrated their

resilience during past and present crises. This

can be observed by comparing the Global

Financial Crisis (“GFC”) in 2008 - 2009 with the

2020 Coronavirus Crisis (“CC”). In both cases,

CCPs managed market and operational risks

and mitigated credit and liquidity risks – in

short: fulfilling their purpose as designed –

despite extraordinary volumes and high

volatility.

Source: FSB, “COVID-19 pandemic: Financial stability implications and policy measures taken” (April 

2020), available at: https://www.fsb.org/wp-content/uploads/P150420.pdf.

Impact of COVID-19 Pandemic and Market Events on 

Derivatives Markets

-Market Volatility in Historical Context 

See also: CCP12, “CCPS AGAIN DEMONSTRATE STRONG RESILIENCE IN TIMES OF CRISIS” (July 2020), available at: https://ccp12.org/wpcontent/uploads/2020/07/CCPs_again_demonstrate_strong_resilience_in_times_of_crisis.pdf. Note, such paper contains and discusses many of the data points included in this presentation.
Impact of COVID-19 Pandemic and Market Events on 

Derivatives Markets

-Market Volatility in Historical Context 

Market Volatility Observed During the CC:

• The 9 largest dollar moves in history of the S&P 500, the 10 largest for the 

Dow Industrial Average, and the 7 largest for the Nasdaq-100 occurred in 

March and April 2020

• S&P 500 and Nasdaq saw their second highest percentage down moves 

ever during this period

• WTI Crude saw its two largest price and percentage moves ever and went 

negative for the first time

• U.S. Treasury yields saw their largest daily percentage shifts and lowest 

absolute levels ever, with the entire yield curve dropping below 1% for the 

first time in history
Exchange-Traded Derivatives Cleared Volume During the CC

Futures March 2019

Options March 2019

 Futures March 2020

Options March 2020

Source: FIA, “ETD Volume – March 2020” (April 2020), available at: https://www.fia.org/resources/etd-volume-march-2020.

Over the course of the CC, clearing 

volumes increased extraordinarily. 

Especially in March 2020, clearing 

volumes reached record highs. In the 

asset classes comparison, clearing 

volumes in agriculture, energy, equity 

index and precious metals showed the 

largest increases.

Clearing Volumes by Asset Class for March 2019 vs. March 2020 

In Millions of cleared trades
Operational Resilience of CCPs during the CC

Most CCP’s implemented Business Continuity 

Plans in response to the CC, enabling full or 

partial work from home, split shifts, and/or 

remote sites. CCPs across the board restricted 

travel, further leveraged video conferencing 

tools, and required quarantine, where 

necessary. Despite these measures and the 

significant increase in volumes, core systems at 

CCP’s remained resilient, as can be seen in Q1 

reporting of PQD’s related to system up time.

PQD 17.2.1 Q4 2019 Q1 2020

Hong Kong Exchanges and Clearing Limited 99.98% 99.98%

Japan Securities Clearing Corporation 100.00% 100.00%

Eurex Clearing 100.00% 99.95%

LCH 99.95% 99.96%

Chicago Mercantile Exchange 100.00% 100.00%

Depository Trust & Clearing Corporation 99.94% 99.96%

Intercontinental Exchange, Inc. 99.99% 99.99%

The Options Clearing Corporation 99.99% 100.00%

Actual Availability Of CCP’s Core System(s) Over The Previous Twelve Months

Comparison of Disclosure 17.2.1 – Q4 2019 vs. Q1 2020

Source: CCP Public Quantitative Disclosures in line with CPMI-IOSCO standards.
Margin Coverage During the CC

Total IM Required Quarter End Figures 

Comparison of Disclosure 6.1.1 – Q4 2019 vs. Q1 2020 in bn USD

PQD 6.5.3 Q4 2019 Q1 2020

Japan Securities Clearing Corporation 99.85% 99.54%

Hong Kong Exchanges and Clearing Limited 99.90% 99.80%

Eurex Clearing 99.82% 99.45%

LCH 99.97% 99.93%

Chicago Mercantile Exchange 100.00% 99.92%

Depository Trust & Clearing Corporation 99.43% 98.46%

Intercontinental Exchange, Inc. 99.94% 99.53%

The Options Clearing Corporation 99.98% 99.96%

Across the board IM increases were observed during the CC, consistent 

with the design of margin models which are intended to reflect price 

movements at a certain confidence interval. That said, the size of the 

overall IM increases relative to extraordinary volatility observed, 

including as demonstrated by the VM flows, were relatively muted. In 

light of the fact that many asset classes had repeated, significant price 

movements, some of these new observed price moves had to be 

incorporated into IM calculation to respect the selected confidence 

interval. This suggests that the anti-procyclical characteristics of CCP 

margin models worked accordingly, while maintaining appropriate 

coverage. Results Of Backtesting Of Initial Margin – Achieved Coverage Level

Comparison of Disclosure 6.5.3 – Q4 2019 vs. Q1 2020

Notably, the increases in IM show the increase from one quarter 

end to the next, but in practice IM increases occurred 

throughout the course of Q1 2020 on an incremental basis. This 

is designed to ease collateral pressures on market participants, 

while providing sufficient margin coverage. 

Source: CCP Public Quantitative Disclosures in line with CPMI-IOSCO standards.

Source: CCP Public Quantitative Disclosures in line with CPMI-IOSCO standards.
Variation Margin During the CC

Quarter Average VM Figures

Comparison of Disclosure 6.6.1 – Q4 2019 vs. Q1 2020 in m USD

S&P 500 Assuming 100 Contracts

10yr Treasury Note Front Month Future

Average VM required at CCP’s increased significantly in 

response to the sharp rise in volatility. This demonstrates 

the severe day-over-day mark-to-market movements 

portfolios were experiencing, as would be expected.

Notably, in comparison, to the IM disclosures, the VM disclosures are provided on a 

quarter average basis so days with more typical VM flows, as were observed in many 

cases in the early part of Q1 2020, depress the overall average for Q1 2020. 

At contract level, given already high levels of IM, IM increases 

were significantly smaller than VM calls. 

Source: CCP Public Quantitative Disclosures in line with CPMI-IOSCO standards.