Panelists from U.S. derivative clearing organizations, their clearing members, and certain customers participated in a CFTC public roundtable to examine recent CPMI-IOSCO guidance on central counterparty ("CCP") resilience and recovery.
Topics addressed at the roundtable included: (i) stress testing, (ii) margin methodology, and (iii) governance, transparency and CCP contributions to losses and recovery. According to a summary prepared by Delta Strategy Group, the roundtable had the following "key takeaways":
- There was disagreement among panelists about the adequacy of the stress testing guidance and several calls for more transparency in stress testing.
- Several panelists called for a principles-based approach to addressing margin requirements.
- According to most panelists, the risk management governance guidance placed too much responsibility on the board of directors.
- Clearing members argued that although there is supposed to be competition amongst CCPs, there really is not much choice for clearing members.
- Panelists from CCPs and clearing members agreed that CCPs having "skin in the game" was an important aspect of mitigating risk.
Commentary / Steven Lofchie
Central clearing was never a cure-all for risk, and it may increase systemic risk. It seems fair to ask whether regulators will be capable of coming to grips with the fact that the benefits of central clearing were radically oversold. See, e.g., Streetwise Professor Examines "Fundamental Tension" Underlying CCP Resolution Authority.
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