May 2022 | CCP12 responds to the OECD Public Consultation Document “Pillar One – Amount A: Regulated Financial Services Exclusion”
In the response to the OECD Public Consultation Document “Pillar One – Amount A: Regulated Financial Services Exclusion” (Link), CCP12 calls for an explicit exclusion of CCPs from the scope of application of Amount A. CCPs are highly regulated entities, subject to local regulatory requirements in their home jurisdiction that are consistent with international standards (i.e., PFMIs ) are driven by the G20 and other multilateral organisations. Thus, they should be subject to the same exclusion as currently envisaged for Regulated Financial Institutions (including Depositary Institutions, Mortgage Institutions, Investment Institutions, Insurance Institutions, Asset Managers, Mixed Financial Institutions and RFI Service Entities). It is very important to appropriately design a taxation framework for CCPs, as has also been emphasised by the IMF.
May 2022 | CCP12 responds to the CFTC Request for Comment on FTX Request for Amended DCO Registration Order
In the response to the CFTC Request for Comment on FTX Request for Amended DCO Registration Order (Link), CCP12 raises numerous concerns regarding FTX’s proposed clearing model (i.e., offering direct clearing to retail and other participants for margined derivatives products) and the many risks that stem from this proposal. If approved by amending FTX’s registration order, this would represent a radical change in the clearing landscape, which would have far-reaching consequences for many stakeholders, including other CCPs, market participants, end/retail clients and the economy as a whole.
May 2022 | CCP12 responds to the FSB, CPMI and IOSCO Report “Central Counterparty Financial Resources for Recovery and Resolution
In the response to the FSB, CPMI and IOSCO Report “Central Counterparty Financial Resources for Recovery and Resolution” (Link), CCP12 emphasises that no further work on CCP resources is necessary, as affirmed by the results of the scenario analysis covered in the Report. The group stresses the implausibility of both – default and non-default scenarios and the fact that despite it, CCPs performed overall very well. We also argue that requiring CCPs to provide additional resources would be a wrong idea – not only would they not alleviate many NDL types of risks but would also distort the incentive structure for DLs. If the SSBs nevertheless decide to continue work on CCP resources, CCP12 is ready to engage and provide its expertise in the process.
April 2022 | CCP12 responds to ESMA’s call for evidence on an approach to Climate Risk Stress Testing of Central Counterparties
In CCP12’s response to ESMA’s call for evidence on an approach to Climate Risk Stress Testing of Central Counterparties [Link], CCP12 provides it’s views on this important topic as it recognizes the importance of mitigating the potential risks and impacts of climate change and the need for CCPs to consider both direct and indirect impacts, such as on their members.
March 2022 | CCP12 responds to ESMA’s consultation paper on the review of RTS No 153/2013 with respect to procyclicality of margin
In CCP12’s response to ESMA’s consultation paper on the review of RTS No 153/2013 with respect to procyclicality of margin (ESMA consults on CCP anti-procyclicality measures (europa.eu)), CCP12 provides it’s views on ESMA’s suggestion on APC margin measures for CCPs. CCP12 emphasizes the performance of CCPs during the crisis and suggest that improvements should be reviewed on a more holistic basis across financial markets, it is stressed that standardization and homogenization is needed in the bilateral markets and not for APC margin measures used by CCPs, it is argued that an incorporation and enhancement of provisions of the existing Guidelines into the RTS is necessary, CCP12 urges ESMA to not apply an overly prescriptive approach, but rather leave it to EU CCPs what APC measures and practices are appropriate and ESMA is asked to coordinate its efforts with other international standard setting bodies rather than moving forward separately. Lastly, CCP12 highlights the transparency of CCPs but also emphasize our support for future efforts on transparency, especially for the uncleared market and the practices of Clearing Members (MPPQDs).
February 2022 | CCP12 responds to the Bank of England’s Consultation Papers on the approach to tiering incoming CCPs (EMIR Art. 25) and the approach to comparable compliance (EMIR Art. 25a)
In the response to the Bank of England’s Consultation Papers on (1) the Bank of England’s approach to tiering incoming central counterparties under EMIR Article 25 (Link) and (2) the Bank of England’s approach to comparable compliance under EMIR Article 25a (Link), CCP12 welcomes the BoE’s intention to commit to an approach of regulatory deference to tiering incoming CCPs and comparable compliance, voices concerns over the initial triage criteria, proposes that the scope of UK CMs should exclude non-UK affiliates and disagrees with the subjective nature of the systemic risk assessment. CCP12 also asks for clearer criteria which would have a clear nexus to the UK and for more clarity on the timeline and on what actions CCPs should undertake next.
February 2022 | CCP12 responds to the CPMI and IOSCO discussion paper on client clearing: access and portability
In the response to the CPMI and IOSCO discussion paper on client clearing: access and portability (Link), CCP12 agrees that no further guidance on the PFMIs is necessary in the context of the new client clearing access models and client porting. CCP12 also stresses that direct and sponsored access models still need time to mature and become more widely used, that it is important to address local regulatory hurdles, e.g. by promoting the porting of clients’ positions and assets and that a regulatory deference approach globally would be welcome. CCP12 expresses its readiness to engage in cooperation with the international Standard-Setting Bodies in order to work out what actions need to be taken in order to make porting robust and/or more effective in the jurisdictions where porting is currently not a viable or likely option of dealing with a CCSP default.
January 2022 | CCP12 responds to the BCBS, CPMI, IOSCO Consultative Report on Review of Margining Practices
In CCP12’s response to the BCBS, CPMI, IOSCO joint Consultative Report on Review of Margining Practices [Link], CCP12 provides its views on the performance of CCPs during the Covid-related stress events, which mitigated counterparty credit risk, ensured robust mark-to-market and collateralisation through the stress event, and on CCPs practices, which were appropriately anti-procyclical and as such, CCPs successfully supported the stability of their respective markets and the financial markets in general. Furthermore, CCP12 refers to the significant transparency already provided by CCPs, including on margining and emphasizes its advocacy of CCPs’ transparency, given its benefits for risk management. CCP12 furthermore emphasizes its support for future efforts on transparency especially for the non-centrally cleared market and the practices of intermediaries and requests that the data and information relating to non-centrally cleared markets be improved. A concept paper for Market Participant Public Quantitative Disclosures has been attached.
January 2022 | CCP12 responds to ESMA’s Consultation Papers on CCP resolution regime
In CCP12’s response to ESMA’s consultation papers on CCP resolution regime, CCP12 provides views on the content of CCP resolution plans [Consultation Paper on draft RTS on the content of CCP resolution plans (europa.eu)], the methodology to value each contract prior to termination [Consultation Paper on draft Guidelines on Methodology to value each contract prior to termination (europa.eu)], valuation of CCPs assets and liabilities in resolution [Consultation Paper on draft RTS on Valuation of CCPs assets and liabilities in resolution (europa.eu)], and the application of the circumstances under which a CCP is deemed to be failing or likely to fail [Consultation Paper on draft Guidelines on the application of the circumstances under which a CCP is deemed to be failing or likely to fail (europa.eu)].
January 2022 | CCP12 responds to the CFTC Request for information and comment on the Swap Clearing Requirements To Account for the Transition From LIBOR and Other IBORs to Alternative Reference Rates
In the response to the CFTC Request for information and comment on the Swap Clearing Requirements To Account for the Transition From LIBOR and Other IBORs to Alternative Reference Rates [Link], CCP12 generally supports the CFTC’s effort to establish the new clearing mandates to reflect the transition of swaps referencing LIBOR to the relevant Risk-Free Rates, emphasizes the importance of clearing and supports a smooth transition, which is aligned between global standard setting bodies and regulators in different jurisdictions across the world.