London, 13 March 2017 – The World Federation of Exchanges ("WFE"), which represents more than 200 market infrastructure providers including exchanges and CCPs, has responded to a consultative document from the Financial Stability Board ("FSB") related to CCP Resolution & Resolution Planning.
As outlined in previous responses to the FSB on the broader topic of CCP Recovery & Resolution*, the WFE maintains its position that recovery must be given every opportunity to succeed before resolution proceedings are invoked. In addition, the key points of the WFE's response are as follows:
- Resolution Authorities should only step in when all CCP recovery actions have been exhausted, or in the interests of broader financial stability.
- Resolution Authorities should have access to appropriate powers and tools to carry out the resolution of a CCP; however, it is important to consider each situation on a case-by-case basis.
- On entering resolution, it is important to balance giving sufficient certainty to participants (including the CCP) with leaving the authorities with sufficient flexibility to make the correct decision to protect market stability.
- The WFE cautions against firstly actions or steps that could skew existing incentives for participants; and secondly, the potential consequences of imposing additional financial obligations on CCPs and/or the wider clearing ecosystem.
- The WFE is very supportive of co-operation between relevant authorities – not only in the event of resolution, but also in its lead up.Crisis Management Groups, strong cooperation and information sharing arrangements are necessary, as are practical exercises to test those arrangements.
Nandini Sukumar, CEO, WFE, said: "The WFE continues to advocate that a CCP-led recovery is in the interest of markets as a whole; indeed, resolution is a worst-case scenario in which CCPs are unlikely to find themselves given the resilience and recovery measures they implement.We do, of course, welcome international efforts to enhance and strengthen the financial system through regulatory reforms that will – amongst other things – increase market confidence whilst reducing systemic risk."
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About the World Federation of Exchanges (WFE):
Established in 1961, the WFE is the global industry association for exchanges and clearing houses. Headquartered in London, it represents over 200 market infrastructure providers, including standalone CCPs that are not part of exchange groups.Of our members, 41% are in Asia-Pacific, 40% in EMEA and 19% in the Americas.WFE exchanges are home to nearly 45,000 listed companies, and the market capitalisation of these entities is over $67.9 trillion; furthermore, around $84.18 trillion (EOB) in trading annually passes through the infrastructures WFE members safeguard (at end 2016).
The WFE is the definitive source for exchange-traded statistics, and publishes over 350 market data indicators.Its statistics database stretches back more than 40 years, and provides information and insight into developments on global exchanges.
The WFE works with standard-setters, policy makers, regulators and government organisations around the world to support and promote the development of fair, transparent, stable and efficient markets.The WFE shares regulatory authorities' goals of ensuring the safety and soundness of the global financial system, which is critical to enhancing investor and consumer confidence, and promoting economic growth.
The WFE's post-trade mandate is one of the four pillars of its work, and is led by its Post-Trade Working Group of technical experts from CCPs globally (the WFE's PTWG). The WFE fulfils its mandate through a combination of policy responses to global regulatory organisations such as IOSCO, BCBS and FSB, and through educational services to its members, many of whom come from smaller, emerging markets as well as the world's largest CCPs and exchanges. The WFE forges consensus globally among CCPs on the issues that matter, and creates industry-led codes of conduct, guidelines and standards as part of its endeavours to improve systemic stability, integrity and quality.
For more information, please contact:
Antoinette Di Massa
World Federation of Exchanges
Phone: +44 20 7151 4152