CCP resolution must be last resort, says WFE

The World Federation of Exchanges urges flexibility and cross-border cooperation for CCP resolutions plans.

The World Federation of Exchange (WFE) has stated central counterparty (CCP) recovery should be given every opportunity to succeed and resolution should only be invoked as a last resort.

A recent whitepaper authored by WFE explained that should CCP resolution occur, there is not a single resolution strategy that can effectively manage all potential scenarios.

As there is no single resolution strategy, flexibility and cross-border cooperation is vital to ensure sound and orderly markets.

Nandini Sukumar, chief executive officer at WFE, explained CCPs play a key role in strengthening the system post financial crisis.

“While acknowledging the need for clear resolution plans, there needs to be clarity as to when they should be invoked. There also needs to be flexibility as to how resolution plans are executed,” she said.

The WFE is looking for regional and national authorities to implement international standards and suggests the regulatory authority in the jurisdiction of the CCP should manage the resolution.

Gavin Hill, head of regulatory affairs at WFE, explained the debate is a result of the recent FSB consultative document and the European Commission’s CCP regulation proposal at the end of last year.

In November last year, the European Commission proposed a set of measures to prevent a failure and bailout of Europe’s 17 clearing houses.

The proposals set out a framework for the recovery and resolution of CCPs and when national authorities can intervene to prevent their failure.

Kay Swinburne, Conservative MEP said at the time: “The key purpose of this legislation should be to ensure every possible measure is in place to prevent tax payers from having to bail out CCPs – either through central bank money or direct public intervention.”

The TRADE recently confirmed Swinburne as a keynote speaker at our latest MiFID II pop-up event on systematic internalisers in London on 27 February.

To register to attend, please click here