EFAMA calls for a robust risk management system for the CCP as it is vital to protect both its clearing and non‐clearing members. Of particular importance are margin and collateral management, as well as pricing and default procedures.
EFAMA welcomes the reduction of counterparty risk that central clearinghouses (CCPs) would bring, but wishes to bring to the European Parliament’s attention the elements that are in its view crucial for the fair regulation of clearing mechanisms and should therefore be considered in upcoming regulation:
· Of greatest importance is the segregation of client positions and posted collateral, even if access to the CCP is indirect (that is, if provided through a clearing member). Almost all asset managers (like the rest of the buy‐side) will choose to have only indirect access to the CCP through a clearing member. Lack of segregation was highlighted by the Lehman bankruptcy as one of the key issues in OTC derivatives.
· The interests of all users (including indirect users) must be adequately reflected in the CCP’s governance rules and structures. Buy‐side representation on the Board of CCPs is needed to ensure fair treatment of all users.
· A robust risk management system for the CCP is vital to protect both its clearing and non‐clearing members. Of particular importance are margin and collateral management, as well as pricing and default procedures.
· Transparency to the public of CCP governance rules, risk management, segregation arrangements and prices is key to permit due diligence by investment managers.
· Position portability: it should be possible for an asset manager to change the clearing members used to access the CCP facilities. A non‐clearing member should therefore be able to request a transfer of open positions from one clearing member to another, or to a member of a different CCP.
© EFAMA - European Fund and Asset Management Association
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article