The new CCP resolution template explained
Author: Gemma Varriale | Published: 7 Aug 2012
Infrastructure Regulation (Emir) has regulators preoccupied with improving
central counterparties (CCPs) systemic risk management. Ioscos recent
consultation and LCH Clearnets newly-launched clearing
service could provide a CCP resolution template.
In a speech last October, Paul
Tucker, deputy governor of the Bank of England sounded a
clear warning to the market about the gap in the resolution
regimes for CCPs. What happens if they go bust?
said Tucker. I can tell you the simple answer: mayhem.
As bad as, conceivably worse than, the failure of large and
Under Emir, all standardised over the counter (OTC)
derivative contracts should be traded on electronic trading
platforms and cleared through CCPs. Although the requirement
for centralised clearing of OTC derivatives may reduce the
risks to counterparties of a default by one or more
individual counterparties, it will also concentrate default