A “fire drill” is taking place this week among global central counterparties (CCPs) to test default management procedures.<\/p>\n
The Amsterdam-based Global Association of Central Counterparties (CCP-Global) is coordinating the first global test, which will review the readiness of CCP staffs, procedures and IT systems for a major firm default.<\/p>\n
While CCPs typically perform their own annual fire drills and some regulators have arranged multi-CCP tests, this is the first global exercise, involving 31 CCPs around the world. Another 15 CCPs will be involved as observers and may participate in future global tests, CCP-Global said.<\/p>\n
The test involves the failure of a hypothetical top-five clearing firm \u2014 dubbed ACME (A Clearing Member Everywhere) \u2014 for each CCP.<\/p>\n
“The aspects tested by each CCP should cover their core default management actions, including portfolio evaluation, simulating risk reduction and re-balancing (trading, hedging, and\/or auctions), communication channels and any relevant technical tools,” CCP-Global said in a paper outlining the test.<\/p>\n
The global fire drill is intended to “help identify potential operational bottlenecks in the procedures, such as the fact that they may solicit non-defaulting clearing members at the same time,” said the European Securities and Markets Authority (ESMA), which is coordinating the participation of various European CCPs in the drill.<\/p>\n
In addition to helping spot vulnerabilities, the exercise is expected to benefit financial stability by identifying best practices for default management among CCPs, ESMA added.<\/p>\n
A report setting out insights from the test for global regulators and standards setters is expected in the first quarter of 2024.<\/p>\n","protected":false},"excerpt":{"rendered":"
Will review the readiness of CCP staffs, procedures and IT systems for a major firm default<\/p>\n","protected":false},"author":147314,"featured_media":475218,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[2324,2312],"tags":[2536,2763,2524,2437,37533],"yst_prominent_words":[17634,104017,87430,58610,44216,44209,28860,24122,19478,18742,18346,18345,2142,6855,5061,4711,2144],"acf":[],"_links":{"self":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/475211"}],"collection":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/users\/147314"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/comments?post=475211"}],"version-history":[{"count":4,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/475211\/revisions"}],"predecessor-version":[{"id":475219,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/475211\/revisions\/475219"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/media\/475218"}],"wp:attachment":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/media?parent=475211"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/categories?post=475211"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/tags?post=475211"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/yst_prominent_words?post=475211"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}