Clearing has become a critical part of the derivatives landscape, with more than three quarters of interest rate derivatives notional outstanding now cleared through central counterparties (CCPs). Market participants have embraced the operational and cost efficiencies that clearing offers, and are now clearing more than what is required by regulatory mandates.
Despite this shift to clearing, work is still required to implement a robust framework for CCP resilience, recovery and resolution. Given the systemic importance of CCPs, ISDA urges regulators and policy-makers to continue working together to finalize unambiguous and predictable CCP recovery and resolution strategies. More politically driven topics – for instance, the debate over CCP location in the European Union and the change of administration in the US – should not distract from this important work.
This paper makes a number of recommendations for a comprehensive CCP recovery and resolution framework that would ensure CCPs can withstand severe market stress. In doing so, ISDA recognizes that these strategies will necessarily have to vary by jurisdiction and by CCP, based on different CCP structures and existing legal regimes.
Click on the attached PDF to read the full paper.
Documents (1) for Safeguarding Clearing: The Need for a Comprehensive CCP Recovery and Resolution Framework
Latest
Raising Clients’ Awareness on Portability
Clients accessing a central counterparty (CCP) via a client clearing service provider (CCSP) for over-the-counter (OTC) and exchange-traded derivatives should consider what may happen to their positions and collateral in a scenario in which the CCSP defaults. While regulatory regimes...
Response to FCA on Ancillary Activities Test
On August 28, ISDA and FIA submitted a joint response to the Financial Conduct Authority’s (FCA) consultation paper CP25/19 on the ancillary activities test to determine if commercial users or producers of commodities that trade in commodity derivatives, emission allowances...
Stress Scenarios for CCP IM Simulators
ISDA has published a paper that explains why stress scenarios that central counterparties (CCPs) use for default fund sizing cannot be used for forward-looking initial margin (IM) simulators. Typically, stress scenarios used by CCPs consist of a single step, transitioning...
Paper on EMIR 3 Active Account Representativeness
On September 4, ISDA, the European Fund and Asset Management Association (EFAMA) and FIA shared a paper with EU policymakers requesting clarification on the implementation of the active account requirement under the third European Market Infrastructure Regulation in relation to...