The Committee on Payments and Market Infrastructures and IOSCO issued a joint consultative report and requested comments on new client clearing access models and portability.
In their report, CPMI and IOSCO highlight current developments in the client clearing of derivatives and analyze to what extent concentration ("in a relatively small number of bank-affiliated clearing firms") creates concerns for client access. CPMI and IOSCO describe new models of client clearing, such as "sponsored" access, and developments in the ability of clients to "port" positions (including in default scenarios). Two identified practices that support successful porting in the event of default include (1) preemptively identifying potential alternate clearing firms and (2) the use of account structures that facilitate fully margined client positions. CPMI and IOSCO propose (i) other effective practices concerning three key elements (communication, coordination and harmonization), (ii) considerations for central clearing parties when developing a porting protocol and (iii) industry next steps.
CPMI and IOSCO seek feedback on:
- access to client clearing:
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- the design of, barriers to, challenges concerning, and testing of direct and sponsored access models; and
- portability in the event of default:
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- risks from not porting,
- communication, coordination and harmonization integrated into effective practices,
- issues when developing a porting protocol, and
- suggested next steps.
Comments must be received by January 24, 2022.
Commentary
Title VII of Dodd-Frank and similar regimes across the world (for better or for worse) placed significant importance on central clearing of derivatives. Given these government-imposed mandates to clear, governments should also seek to make clearing efficient, cost-effective and appealing to market participants who seek to transact in these instruments.
Primary Sources
- CPMI and IOSCO: A Discussion Paper on Client Clearing - Access and Portability
- CPMI and IOSCO Press Release: Call for Comments on Access to Central Clearing and Portability
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