Central counterparty and PIK notes: Difference between pages

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(CCP).  
Debt instruments based on non-cash payment of interest coupons.


A financial institution that acts as an intermediary between market participants including corporate treasuries.
Interest is usually recognised by an increase in the amount of principal owed by the borrower.


The CCP must be duly recognised by the regulator ('Competent Authority') in its jurisdiction.


PIKs are generally either unsecured loans or deeply subordinated securities ranking just before equity in the capital structure.


UK central counterparties recognised by the Bank of England include:
This means that, in the event of a bankruptcy, PIKs are the last debts to be repaid, making them a high risk instrument for lenders and investors.  
*CME Clearing Europe Limited
*LCH.Clearnet Limited
*LME Clear Limited


In order to compensate lenders for the risk, PIKs have to offer significantly enhanced rates of return to investors.


Most central counterparties are clearing houses.


Also sometimes known as 'central clearing parties'.
== See also ==
 
* [[Coupon]]
 
* [[Equity]]
 
* [[Interest]]
<span style="color:#4B0082">'''''Brexit, central counterparties, stability risks and costs'''''</span>
* [[Notes]]
 
* [[Payment in kind]]
:"... If we turn to central counterparties (CCPs), if the UK leaves the EU without mitigating action on both sides, EU and UK CCPs could find they are in breach of regulation by providing clearing services in the other’s jurisdiction.
* [[Principal]]
 
* [[Secured debt]]
:This would apply to maintaining existing positions as well as taking on new positions. This would require abrupt close-out of positions, with attendant financial stability risks and costs to real economies.
* [[Subordinated debt]]
 
* [[Unsecured debt]]
:I would add that this risk is more acute for EU users because of the volume of activity conducted in UK CCPs."
 
:''Andrew Bailey, chief executive, Financial Conduct Authority, February 2018.''
 
 
==See also==
* [[Brexit]]
* [[Clearing house]]
* [[Competent Authority]]
* [[EMIR]]
* [[Financial Conduct Authority]]
* [[Intercontinental Exchange]]
* [[LME Clear]]
* [[Novation]]
* [[SMF participant]]
* [[Variation Margin Gains Hedging]]
 
 
==External links==
 
[https://www.fca.org.uk/news/speeches/future-city Andrew Bailey, Financial Conduct Authority (FCA), The Future of the City]
 
[https://www.fca.org.uk/news/statements/statement-transitional-arrangements-trading-venues-under-mifir-article-542 FCA agrees transitional arrangements for ICE Futures Europe and the LME]
 
[[Category:Accounting,_tax_and_regulation]]
[[Category:Treasury_operations]]

Revision as of 14:21, 22 August 2017

Debt instruments based on non-cash payment of interest coupons.

Interest is usually recognised by an increase in the amount of principal owed by the borrower.


PIKs are generally either unsecured loans or deeply subordinated securities ranking just before equity in the capital structure.

This means that, in the event of a bankruptcy, PIKs are the last debts to be repaid, making them a high risk instrument for lenders and investors.

In order to compensate lenders for the risk, PIKs have to offer significantly enhanced rates of return to investors.


See also

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