On 7 February 2017, the WFE published a white paper entitled ‘The interplay between Central Counterparty (CCP) recovery and resolution: a global perspective’.
The paper set out the views of the exchange and CCP community from a global practitioner perspective.
In particular, the paper outlined the position of the WFE and its global membership base on two key issues:
- The boundary between recovery and resolution, and the relative responsibilities of CCPs and market authorities; and
- Third country arrangements when entering, and managing, the resolution of a CCP.
In summary, and as outlined in its most recent consultation submissions on the topic, (to the FSB and to CPMI-IOSCO, in October 2016), the WFE’s position is that recovery should be given every opportunity to succeed, and resolution should only be invoked as a last resort once all appropriate recovery measures have been exhausted by the CCP.
Should resolution occur, however, the WFE advocates that there is not one single resolution strategy that will effectively manage all potential scenarios, therefore flexibility is key. In addition, cross-border cooperation is vital to ensure sound, smooth and orderly markets.
The white paper is accompanied by a one-page fact sheet on ‘Desired outcomes relating to entering (and managing) resolution’, which sets out the top ten outcomes the WFE and its membership seeks to achieve in this regard. These outcomes include that:
- Regional and national authorities should implement international standards as closely as possible;
- Continuity of payment, clearance and settlement services must be the primary objective, given the systemic importance of the functions they provide; and
- The resolution of a CCP should be led by the Resolution Authority of the jurisdiction in which the CCP is established, in close cooperation with other relevant authorities.