The Securities and Exchange Commission (SEC) has proposed rule changes to improve the resilience and wind-down planning of covered clearing agencies (CCA).
Existing rules related to intraday margin and the use of substantive inputs to a covered clearing agency’s risk-based margin system will be amended by the proposal, with a new rule added to establish requirements for the contents of a CCA’s recovery and wind-down plan.
CCAs would be required by the proposal to have policies and procedures to establish a risk-based margin system which monitors intraday exposure on an ongoing basis.
An authority and operational capacity will also be required to make intraday margin calls as frequently as circumstances warrant, such as when risk thresholds specified by the CCA are breached or when the products cleared, or markets served, display elevated volatility.
CCAs will also be required to have policies and procedures which address the use of substantive inputs to its risk-based margin system when such inputs are not reliable or available immediately.
A new rule is included in the proposal, which would add to the existing requirements for CCAs to have recovery and wind-down plans in place and will now specify nine elements required to for those plans.
“Today’s proposal would help ensure the continuity of clearing services during times of significant stress,” said Gary Gensler, SEC chair.
“Well-regulated and well-managed clearinghouses help lower risk for the public. I am pleased to support the proposal because, if adopted, it would help enhance the resiliency of this part of our market plumbing, which is fundamental for the capital markets to operate.”