FIA issues updated CCP risk management recommendations

27 November 2018

Singapore – FIA today published a series of recommendations to improve clearinghouse risk management following recent market developments. Today’s paper is an update to a 2015 series of recommendations. Central counterparties (CCPs) are key institutions in the global financial system and their importance has only grown since the G-20 group of nations mandated the clearing of certain products as a way to build in safety and soundness to the global financial system.

“These recommendations aim to improve the risk management of every clearinghouse globally,” said FIA President and CEO Walt Lukken. “Today’s white paper covers issues highlighted by recent developments such as membership criteria, auction process, concentration risk, skin-in-the-game, and margin adequacy among other recommendations.

FIA’s position paper reflects the perspective of clearing members, and addresses the risks that CCPs bring to clearing members, their clients, and the market generally. Specifically, today’s paper contains multiple recommendations in the following areas:

  • Membership criteria
  • CCP governance of self-clearing members
  • Margin adequacy (particularly in low-liquidity markets and in respect of concentration risk and correlation risk)
  • Regulatory oversight
  • Risk management of members by CCPs
  • Default management including design and testing
  • Skin-in-the-game

In total there are 15 specific recommendations on the above topics that, taken together, FIA believes would improve the health and safety of the global clearing system.

”We look forward to engaging with CCPs globally to discuss these recommendations further,” said Lukken.

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