The Depository Trust & Clearing Corporation (DTCC) has launched a new public-facing Value at Risk (VaR) calculator through its Fixed Income Clearing Corporation (FICC) Government Securities Division (GSD). This tool aims to provide market participants with a clearer understanding of potential margin and clearing fund obligations, as explained in a press release.
The introduction of the VaR calculator comes ahead of the U.S. Securities and Exchange Commission’s (SEC) expanded U.S. treasury clearing rule, set to take effect in 2025 and 2026. This rule is expected to increase U.S. Treasury clearing activity through FICC by US$4 trillion daily. The calculator is designed to help firms accurately determine VaR and potential margin requirements for simulated portfolios.
“VaR is a fundamental risk management tool in financial services and a key component of GSD’s clearing fund requirements,” said Tim Hulse, managing director of Financial Risk & Governance at DTCC. “The calculator uses historical data, volatility, and confidence levels to estimate VaR, thus enhancing market transparency.”
Potential margin obligations
The new tool allows market participants to calculate potential margin obligations for various positions and market values using FICC’s VaR methodology. This initiative aims to assist firms in evaluating their risk exposure in light of the forthcoming regulatory changes.
CCLF
A few weeks ago, FICC already introduced a public Capped Contingency Liquidity Facility (CCLF) calculator. The CCLF calculator aims to assist participants in estimating their liquidity obligations associated with FICC Government Securities Division membership.
