skandinaviska Enskilda banken significantly increased its voluntary add-on to market risk requirements in the second quarter, pending approval for changes to its internal model framework.

As of the end of June, the bank applied an additional Skr3.2 billion ($336 million) in risk-weighted assets (RWAs) to its market risk charges. This marks a ample rise from the Skr1.3 billion add-on introduced in the frist quarter.

Regulatory frameworks for banks, such as those established by basel III, mandate specific capital requirements to ensure financial stability. Market risk, a key component of these requirements, quantifies the potential losses a bank could incur due to adverse movements in market prices, including interest rates, foreign exchange rates, and equity prices. Banks often employ internal models to calculate these risks, subject to supervisory approval. Voluntary add-ons, like the one implemented by Skandinaviska Enskilda banken, can be introduced by banks to bolster their capital buffers beyond regulatory minimums, often in anticipation of or response to evolving risk landscapes or internal assessments of their risk profile.

Q: What is a voluntary add-on to market risk requirements?
A: A voluntary add-on is an additional amount of capital a bank chooses to hold against its market risk exposures, exceeding the minimum requirements set by regulators. This is often done to strengthen the bank’s financial resilience.

Q: Why did Skandinaviska Enskilda Banken increase its add-on?
A: The bank increased its add-on pending approval of changes to its internal model framework, suggesting a proactive measure to align with potential new risk assessments or regulatory expectations.

7 · Compliance & Disclaimers

This article provides factual reporting on financial matters and does not constitute health, finance, or legal advice. Readers should consult with qualified professionals for personalized guidance.

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Margin at US Futures Commission Merchants Hits Record High in June

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Margin at US Futures Commission Merchants Hits Record High in June

Required margin for cleared swaps held by United States Futures Commission Merchants (FCMs) climbed to a record high in the first half of June,according to data released by the National Futures Association.The surge reflects heightened activity and potential volatility in the derivatives market.

Client Margin Requirements Reach $173.2 Billion

The 17 reporting firms collectively held $173.2 billion in client margin requirements as of June 16, 2025, marking a 1.5% increase compared to the preceding two-week period. This ample figure underscores the significant volume of cleared swaps transactions occurring through FCMs.

Did You Know? The Dodd-frank Act of 2010 mandated that standardized over-the-counter (OTC) derivatives be cleared through central counterparties (CCPs), increasing the role of FCMs in managing margin requirements.

Royal Bank of Canada Sees Largest Proportional Increase

Among the major firms, Royal Bank of Canada experienced the most significant proportional rise in margin requirements. The increase suggests a notable shift in their client activity or risk exposure within the cleared swaps market.

Understanding Futures Commission Merchants (FCMs)

A Futures Commission Merchant (FCM) plays a crucial [[3]] role in the financial ecosystem. An FCM solicits or accepts orders to buy or sell futures contracts, or options on futures, from customers, typically requiring payment or deposited funds to cover potential losses [[2]]. These firms act as intermediaries, connecting traders to the exchanges where futures contracts are bought and sold.

Pro Tip: When selecting an FCM, consider factors such as financial stability, regulatory compliance, technology platform, and customer service.

FCM Regulatory Obligations and accounting Standards

FCMs are subject to stringent regulatory oversight to ensure the integrity of the market and protect customer funds. They are required to maintain meticulous accounting records [[1]] that accurately reflect all financial activities. These records must adhere to U.S. Generally Accepted Accounting Principles (GAAP) and be prepared on an accrual basis.

Furthermore, FCMs must meet minimum capital requirements and segregate customer funds from their own assets to prevent misuse or commingling.Regular audits and compliance checks are conducted to verify adherence to these regulations.

Key FCM Metrics (June 16, 2025)
Metric	Value
Total Client Margin requirements	$173.2 Billion
Increase Over previous Two Weeks	1.5%
Number of Reporting Firms	17

The Importance of Margin Requirements

Margin requirements serve as a financial safeguard, ensuring that traders have sufficient funds to cover potential losses on their positions. These requirements are typically calculated as a percentage of the contract’s notional value and are adjusted based on market volatility and risk assessments.

when margin requirements increase, it can signal heightened risk or uncertainty in the market. Traders may need to deposit additional funds to maintain their positions, potentially leading to reduced trading activity or increased hedging strategies.

What impact will these rising margin requirements have on trading strategies? How might smaller firms be affected?

Evergreen Insights: The Role of FCMs in the Financial System

Futures Commission Merchants (FCMs) have been a cornerstone of the financial system for decades, facilitating trading in futures and options markets. Their role has evolved significantly over time, particularly wiht the increasing complexity of financial instruments and the implementation of stricter regulations.

Historically, FCMs primarily served as intermediaries for agricultural commodities. However, today they handle a wide range of assets, including financial instruments, energy products, and metals. The rise of electronic trading and globalization has further transformed the FCM landscape, requiring them to invest in advanced technology and expand their global reach.

Frequently Asked Questions About Futures Commission Merchants

What is a Futures Commission Merchant (FCM)?

A Futures Commission Merchant (FCM) is an entity that solicits or accepts orders to buy or sell futures contracts or options on futures from customers in exchange for payment. [[2]]
what are the key regulatory obligations for FCMs?

FCMs face several regulatory requirements, including maintaining an accounting system that accurately records all financial activity. These financial reports must adhere to U.S. Generally Accepted Accounting Principles (GAAP) and be prepared on an accrual basis. [[1]]
Why are margin requirements important for Futures Commission Merchants?

Margin requirements are crucial for FCMs as they represent the funds needed to cover potential losses on futures contracts. Increased margin requirements indicate higher risk or volatility in the market.
What role do Futures Commission Merchants (FCMs) play in financial markets?

Futures Commission Merchants (FCMs) play a vital role in financial markets by facilitating trading in futures contracts and options on futures. They are subject to regulatory requirements, risk management protocols, and customer fund protections. [[3]]
What accounting standards must Futures Commission Merchants follow?

Futures commission merchants (FCMs) are required to adhere to U.S. Generally Accepted Accounting Principles (GAAP) when preparing their financial reports. These reports must be created from an accounting system that meticulously records all of the firm’s financial activities. [[1]]
How do FCMs protect customer funds?

FCMs are subject to strict regulations designed to protect customer funds. These regulations include segregation requirements, which mandate that customer funds be kept separate from the FCM’s own assets.

Disclaimer: This article provides general information and should not be considered financial advice. Consult with a qualified financial professional before making any investment decisions.

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