08 February 2017
Paris
Reporter: Drew Nicol

WFE calls for CCP control over recovery plans


The World Federation of Exchanges (WFE) has deemed a scenario where a central counterparty (CCP) would need to initiate a recovery plan as “beyond extreme” and asked for patience from regulators in administering resolutions.

In a recent whitepaper, which discussed appropriate measures to mitigate the potential market disruption of a CCP going into recovery or resolution, WFE outlined the importance of allowing CCPs time to conduct their own processes in stress scenarios, without regulatory interference.

“Recovery should be given every chance of success in the interests of maintaining the stability of the wider system. Resolution authorities should not interfere with or override the CCP’s recovery process,” WFE’s whitepaper said.

“CCP rulebooks should focus on establishing the appropriate tools and procedures to address stress in their markets in order to ensure a CCP’s critical functions endure during market disruption,” it continued.

“These rulebooks will include robust tools designed to ensure the return to matched book and full allocation of losses under a process run by the clearing house. Such rules have been developed using industry guidance and reviewed by the relevant authorities (and market participants through the rule change governance procedures) ensuring CCPs are able to execute them appropriately and in a timely fashion.”

“However, by definition, any recovery and/or resolution event is beyond extreme but plausible as currently defined. As such it would be impossible to plan the precise tools to be used in any given scenario.”

The federation also called on national regulators to agree international standards as closely as possible and refrain from extraterritoriality to enhance the likelihood of cross-border cooperation in global markets.

More regulation news
The latest news from Securities Lending Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Repo passes judgement on MMF collateral rules
18 August 2017 | Brussels | Reporter: Drew Nicol
Thirteen industry stakeholders made up of major global banks and industry associations responded, with largely positive feedback on ESMA’s proposals
SEC launches new 2018 disclosure forms
15 August 2017 | Washington DC | Reporter: Drew Nicol
New securities lending disclosure forms Forms N-1A, N-3 and N‑CSR are now in play for open-end and closed-end funds in the US, as of 1 August
DC Circuit orders review of OCC’s capital plan
10 August 2017 | Chicago | Reporter: Drew Nicol
The US Court of Appeals for the DC Circuit has called on the US SEC to reconsider its premature acceptance of OCC’s amended capital plan
Electronic repo trading on the rise, says Bruni
04 August 2017 | New York | Reporter: Jenna Lomax
“Many factors” — but particularly the new margin requirements for over-the-counter (OTC) derivatives—are driving the trend
ISLA welcomes asset segregation opinion
02 August 2017 | London | Reporter: Mark Dugdale
The International Securities Lending Association has welcomed an opinion that will clarify asset segregation and the application of depository rules to central securities depositories
FDIC tells firms to prepare for T+2
31 July 2017 | Washington DC | Reporter: Mark Dugdale
US financial services firms should take appropriate steps to ensure they are prepared for the move to T+2 settlement on 5 September
US regulators to work together on Volcker Rule
28 July 2017 | Washington DC | Reporter: Stephanie Palmer
Five US federal financial regulatory agencies are coordinating the efforts to review the regulatory treatment of certain foreign funds under Section 619 of the Dodd-Frank Act, better known as the Volcker Rule