ISDA and FIA Respond to CPMI-IOSCO Consultation on General Business Losses

On February 5, ISDA and FIA responded to the Committee on Payments and Market Infrastructures (CPMI) and International Organization of Securities Commissions (IOSCO) consultation on the management of general business risks and general business losses by financial market infrastructures (FMIs). The associations welcome the consultation’s emphasis that FMIs should maintain sufficient resources to bear general business losses (GBLs) for which they are solely responsible, given these losses stem from risks under FMI control and are not appropriately allocated to participants. The associations support a more prescriptive approach to addressing GBLs, building on observations from previous Level 3 assessments that identified widespread inconsistencies and gaps in FMI practices.

The associations call for greater clarity and consistency in determining loss scenarios, the sizing of liquid net assets funded by equity (LNAFE) and expectations for transparency, governance and stakeholder involvement. Key recommendations include increasing the minimum LNAFE requirement beyond six months of operating expenses, adopting common scenario standards across FMIs, enhancing disclosure of risk management assumptions and resources, and conducting post guidance assessments to promote global convergence. The associations reiterate that variation margin gains haircutting should not be used to allocate GBLs, given its misalignment with the nature of such losses and the potential destabilizing effects on market participants. Overall, the response supports the CPMI–IOSCO initiative while urging globally consistent implementation that strengthens accountability, improves comparability across FMIs and enhances resilience.

Tags:

, , ,

Documents (1) for ISDA and FIA Respond to CPMI-IOSCO Consultation on General Business Losses

ISDA Omnibus Canadian Representation Letter

On September 2, ISDA published the Omnibus Canadian Representation Letter, which combines previously published representation letters drafted to assist firms in compliance with Canadian trade reporting, business conduct, regulatory margin and clearing classification rules. The Omnibus Canadian Letter is designed...

Joint Response on Cross-margining

On August 31, ISDA and FIA submitted a letter to the US Commodity Futures and Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) on the agencies’ joint request for comment on the implementation of portfolio margining and cross-margining...