Global Clearing Houses - Skin In The Game?

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Welcome to Global Custody Pro, read by custody professionals like you. I'm Brennan McDonald, Managing Editor. I write about the global custody industry, having spent over 12 years in financial services, including working at a global custody bank. An AI voice reads the audio version of this newsletter. Have feedback? Just reply to this email or connect with us on LinkedIn.

Table of Contents

• Key Findings

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About This Monday Series

Premium subscribers to Global Custody Pro receive exclusive Monday observations from this developing database project. While Wednesday and Friday bring news about custody and digital assets, Monday focuses on the post-trade infrastructure underlying global markets.

The database currently covers most major CCPs with quarterly data through Q2 2025. As I add more institutions and quarterly updates, subscribers get early access to observations and questions emerging from the data.

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Analysis of 652 observations from 37 central counterparties reveals stronger interdependence between risk buffers

Central counterparties (CCPs) manage trillions in collateral to ensure stability in global derivatives and securities markets. New empirical analysis examining comprehensive data from 2015 to 2025 reveals that the relationship between CCP capital buffers and collateral requirements is substantially tighter than previously documented, with important implications for market participants and regulators.

Key Findings

The analysis, drawing on 652 quarterly observations from 37 global CCPs through the CPMI-IOSCO Public Quantitative Disclosure framework, examines the bidirectional correlation between skin-in-the-game capital and initial margin requirements using panel regression techniques.

A 10 per cent increase in initial margin is associated with an 8.2 per cent increase in skin-in-the-game capital (elasticity of 0.819, 95% CI: 0.784-0.855). Conversely, a 10 per cent increase in capital is associated with a 9.3 per cent increase in initial margin (elasticity of 0.928, 95% CI: 0.887-0.968).

Importantly, these findings represent statistical associations, not causal relationships. The analysis identifies correlation between capital and collateral but cannot determine whether one causes changes in the other. Both buffers likely adjust in concert, driven by common factors such as the CCP's underlying perception of market risk, regulatory requirements, or business conditions.

The difference in magnitude between these elasticities suggests collateral requirements are more responsive to capital changes than capital is to collateral changes. This indicates capital serves as a more structural tool while margin adjustments are more dynamic.

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