We were having an internal discussion to decide what credit rating should we assign to an exchange like Nymex or CME. We usually have some internal threshold (deterministic P99) for each rating. After talking to few people, looks like people assume the credit limit to an exchange could be infinity , LOL. Ofcourse that does not look good optics wise. So how do you explain to management, the risk for an exchange default is small. THanks

Wouldn't the rating of the exchange be tied to the low-side tail of ratings of all participants in the exchange (modulated by the extent and security of margin reserves)? If a major counterparty fails, what are the legalities and timeframes for seizure of margin? Does (and could) Nymex or CME wait for a bankruptcy court to adjudicate recovery fo assets needed to cover failed deals?I suspect the ratings of the entities are lower than one might hope (unless one relies on the ever-optimistic "too-big-to-fail" strategy).

At last! In the past when I've mentioned this topic I got either abuse or embarrassed silence!P

This problem sounds non commonly. How to describe the default of Nymex or CME what kind of statistics about defaults for exchanges of such levels. What the actual debt of Nymex or CME? It might be imagined that in a small ZZZ country exchange sold to AAA exchange to up the level of business. But this all hypothetical. The real data can highlight the situation.

There won't be any real data until it is too late. P

and therefore we are too early?

Over the last week I've been speaking to people at all levels about what could possibly happen next. Some people try to reassure me along the lines of "your money is safe because the shares are in your name" or "your money is safe because of cooling-off periods" or "your money is safe because that bond has insurance" and every time I dig deeper it is exactly as Collector has warned...nobody has a clue about ownership/insurance/etc... none of this has been tested before, details of the 'small print' may be crucial but equally the small print may get rewritten under emergency measures, the rules might be torn up and rewritten on a case-by-case basis. I've always advocated analyzing worst-case scenarios (as opposed to all that probabilistic copula or extreme-value theory garbage). Had such measures been adopted generally then the current mess might not have happened. But now all those "copulators" (who use copula models), or f**kers as I call them (the Anglo-Saxon translation) mean that worst cases are almost too awful to contemplate.Lawyers are the only ones who'll benefit from this, as usual. I'm on record as saying that one day soon we'll all be living in caves, just that lawyers will be living in bigger caves than the rest of us.P

I agree with what said above. It was difficult to describe all in details but say classical mechanics Newton's laws do not change for the difficult problems. Pouring money in US and Europe will lead to increase all prices, therefore inflation, changes cross country exchange rates. Who will loose money? These Primary owners of US, Europe Treasuries. What happen when we decided to sell Treasuries say some time later? They will be converted in the currencies which value will be significant bellow then sometime before. 3-4 days ago before Plan it was a comment regarding US Market Account securities insurance. Do not afraid it will be covered by the new valued $$s. Is it will be bad for European or us citizen. Not too much. What will be with oil and gas? It is not clear because of a possible changes in respond. These countries are also primary holders of Treasuries.