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
Trax gains MiFID II ARM licence from UK FCA
29 September 2017 | London | Reporter: Drew Nicol
Reporting solution provider Trax is among the first to be approved by the UK FCA as an approved reporting mechanism (ARM) for transaction reporting services under MiFID II
Shadow banking will not be banned, confirms IMF
26 September 2017 | Helsinki | Reporter: Jenna Lomax
The IMF, along with the FSB and other regulatory bodies, have no desire to shut down the alternative financing industry but that some aspects of the market’s risk features must be managed
AcadiaSoft expands user base for IM compliance
21 September 2017 | Massachusetts | Reporter: Drew Nicol
The second phase of the IM rules went live on 1 September under the regulatory framework of BCBS and IOSCO
FCA takes pragmatic approach to MiFID II deadline
20 September 2017 | London | Reporter: Drew Nicol
The UK’s financial conduct authority has indicated it will accept a soft roll out of the second Markets in Financial Instruments Directive in January
Ten-year T2S saga comes to an end
19 Septemeber 2017 | Brussels | Reporter: Stephanie Palmer
The Target2-Securities pan-European harmonised settlement platform is finally fully operational, as the Spanish and Baltic markets completed their migration yesterday
Margin rules changing collateral industry, says ISDA
19 September 2017 | London | Reporter: Drew Nicol
New margining rules for non-cleared derivatives are significantly changing collateral practices, according to the International Swaps and Derivatives Association
FIA offers EU guidance on third-country CCP supervision
08 September 2017 | Brussels | Reporter: Drew Nicol
The Futures Industry Association has waded into the debate over the European Commission’s proposal for a two-tier system for regulating EU and non-EU CCPs