December 2022 | CCP12 responds to FSB Consultation on Crypto-asset Activities
In the response to the FSB Consultation on Crypto-asset Activities (Link), CCP12 welcomes the proposed framework and agrees that the principle of ‘same activity, same risk, same regulation’ should apply to crypto-assets and intermediaries where they perform an equivalent economic function to one performed by instruments and intermediaries in the traditional financial system. We fully support the approach of subjecting stablecoin arrangements and other crypto-asset activities to standards similar to those applicable to FMIs (such as PFMIs) when the services offered are of a comparable nature. CCP12 also emphasises the importance of transparency and proposes that providers of crypto-asset activities become subject to strict transparency rules and are required to publish public disclosures, in line with CCPs’ practices of publicly sharing a significant amount of granular, qualitative and quantitative information.
October 2022 | CCP12 responds to CFTC’s Notice of Proposed Rulemaking on Governance Requirements for DCOs
In the response to CFTC’s Notice of Proposed Rulemaking on Governance Requirements for DCOs (Link), CCP12 – The Global Association of Central Counterparties – generally agrees with the NPR’s proposed rule text with a few comments that are primarily technical in nature, such as that the CFTC should not propose further requirements beyond what is included in the proposed rule text. Several of the proposed additional governance requirements contemplated in the requests for comment are not suitable for all DCOs, given differences in size, ownership and management structures, market participants served, and mix of products cleared. Furthermore, CCP12 believes, that it is imperative to ensure that market participants’ involvement in DCO governance is limited to risk-based input into the DCO’s risk management decisions.
October 2022 | CCP12 responds to the SEC’s Proposed Rule on Clearing Agency Governance and Conflicts of Interest
In the response to the Securities and Exchange Commission’s Proposed Rule on Clearing Agency Governance and Conflicts of Interest (Link), CCP12 welcomes that the Commission intends to continuously improve the safety and transparency of the financial markets. At the same time, we believe that some of the Proposed Rule regarding the governance and conflicts of interest of clearing agencies may be too prescriptive, given the diversity among clearing agencies and the need for these organizations to tailor their structures and governance for the markets and products they clear. CCP12 observes that clearing agencies have performed exceptionally well historically, even during periods of market stress. As such, it is unclear to us what specific issues or problems the Proposal is trying to address. We also worry that complying with the Proposed Rule would likely be much more operationally burdensome and resource-intensive for clearing agencies than the document seems to envisage.
October 2022 | CCP12 responds to CFTC’s Request for Information on Climate-Related Financial Risk
In the response to CFTC’s Request for Information on Climate-Related Financial Risk (Link), CCP12 – The Global Association of Central Counterparties – emphasizes, that any work with respect to climate-related financial risks recognizes and builds upon the various practices that CCPs already employ to effectively mitigate and manage climate-related financial risk. This is illustrated, by examples of how CCP risk management frameworks already take into account both categories of climate-related financial risks – physical and transition risks. To underline the flexibility of CCPs to tailor their risk management practices to the unique risks inherent in their markets and the products they clear, CCP12 advocates for a principles-based regulatory framework for CCPs and does not believe that additional regulatory requirements for CCPs that are specific to climate-related financial risks should be adopted. Furthermore, CCP12 believes that CCPs are best suited to appropriately design their stress testing frameworks and size their financial resources to capture the unique risks inherent in the products they clear, as is evidenced by their successful navigation of various stress events, both recent and historical ones. Lastly, CCP12 continues to emphasize that any approach taken by the CFTC related to climate-related financial risk- disclosures should be flexible (i.e., outcomes-based) to permit each CFTC-regulated entity, including CCPs, to use such data points and other information in the manner most appropriate to their roles in the marketplace.
October 2022 | CCP12 responds to CPMI and IOSCO A discussion paper on central counterparty practices to address non-default losses
In the response to CPMI and IOSCO A discussion paper on central counterparty practices to address non-default losses (Link), CCP12 opposes additional standards or guidelines for addressing NDLs as we think that PFMIs already provide a solid foundation for risk management practices, including for NDL-related risks. We find the PFMIs comprehensive, while not being overly prescriptive. We also think the CCP survey results presented in the discussion paper do not provide evidence for the need for further work in this area. CCP12 believes that CCPs’ history and past performance, particularly in times of unprecedented stresses, already demonstrate their resilience and ability to effectively manage the risks they face, including NDL-related risks. At the same time, we can appreciate that information sharing and the exchange of views among CCPs on practices relating to NDLs can be beneficial and we would support efforts to increase the dialogue and information sharing and encourage CPMI-IOSCO to bring together industry participants to share practices through organising workshops or tabletop exercises. In addition, our view is that the CCPs’ and their regulators’ main emphasis in the realm of management of NDL-related risks should continue to be on CCPs’ taking the appropriate preventative measures that mitigate the likelihood of NDLs and any attempt to shift the focus from NDL prevention to the CCPs’ amassing more financial resources to cover NDLs will most likely not help to prevent NDLs, or deal with them effectively. We also highlight that it is of the utmost importance that CCPs comply with the PFMIs as implemented in their local jurisdictions, and enforced by their local regulators.
September 2022 | CCP12 responds to the ESMA Consultation Paper on the clearing and derivative trading obligations in view of the 2022 status of the benchmark transition
In the response to the ESMA Consultation Paper on the clearing and derivative trading obligations in view of the 2022 status of the benchmark transition (Link), CCP12 welcomes the changes proposed by ESMA. We fully agree that the introduction of the single currency OIS class referencing TONA (JPY) with maturities up to 30Y to the scope of the CO and the expansion of the maturities for the OIS class referencing SOFR (USD) within that scope are steps in the right direction. The benefits of central clearing have been proven and recognised over the years, as protecting market participants from the bilateral non-centrally cleared risks they were exposed to during the Global Financial Crisis. The decision-making process regarding whether to include the OTC derivatives referencing the RFRs in a CO should be straight-forward, as “this is about accompanying a transition where the products are broadly similar but with different benchmarks”. The transition to RFRs is a realisation of global benchmark reform which further increases the markets’ safety and reliability, therefore the CO determination should be consistent with this reform.
September 2022 | CCP12 responds to the Bank of England’s Consultation paper on the fees regime for incoming central counterparties
In the response to the Bank of England’s Consultation paper on the fees regime for incoming central counterparties (Link), CCP12 expresses concerns that the Bank’s proposal is inconsistent with global best practices of major jurisdictions and introduces fees which in some cases would be excessively high (especially for smaller and mid-sized CCPs). We are also worried about a certain level of unpredictability of fees which would be charged in the next fee years – in the current model CCPs might not have enough time to appropriately budget for the fees (especially due to the possibility of their adjustment taking place later in the year). If some CCPs are deterred from applying for recognition with the Bank due to the high level of fees or predictability issues, this may cut off UK entities from accessing some non-UK CCPs and have negative consequences resulting from the lack of the QCCP status of some CCPs the services of which the UK entities might be using.
August 2022 | CCP12 responds to the OECD Progress Report on Amount A of Pillar One
In the response to the OECD Progress Report on Amount A of Pillar One (Link), CCP12 calls again 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 jurisdictions that are consistent with international standards (such as PFMIs ). CCP12 is of a strong view that the exclusion should be based on the merit of the policy priorities and the special role CCPs play in the markets. Excluding different types of financial institutions (which are participants of the same system and which enjoy the benefits of central clearing) but not financial market infrastructures such as CCPs, which are some of the most strictly regulated and supervised ones and which facilitate the functioning of the financial markets and make them safer, would create an unlevel playing field and an unjustified and very unwelcome gap in the taxation rules.
July 2022 | CCP12 response to Bank’s Consultation Paper on Outsourcing and third-party risk management: Central Counterparties
In its response to the Bank of England Consultation Paper on Outsourcing and third-party risk management: Central Counterparties (Link), CCP12 – The Global Association of Central Counterparties – provide its views and comments to the different areas in the proposal to the draft Supervisory Statement.
July 2022 | CCP12 responds to the CFTC Proposed Rule on Clearing Requirement Determination for IRS To Account for the Transition From LIBOR and Other IBORs to Alternative Reference Rates
In its response to the CFTC Proposed Rule on Clearing Requirement Determination for Interest Rate Swaps To Account for the Transition From LIBOR and Other IBORs to Alternative Reference Rates (Link), CCP12 commends the CFTC for broadly taking into account the feedback received in the previous consultation round from CCP12 and some of its members. We generally welcome the Proposed Rule, emphasise the importance of central clearing, stress the role of CCPs in market transition to RFRs and notice the voluntary move of market participants to use the CCPs’ services in this regard.
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.