London, 28 November 2016 – The World Federation of Exchanges ("WFE"), which represents more than 200 market infrastructure providers including exchanges and central counterparties ("CCPs"), today notes the European Commission's proposal for regulation regarding the recovery and resolution of CCPs, and welcomes the importance placed on consistency with international standards.
The proposed legislation, which will need to be ratified by the European Parliament and the Council of the EU, seeks to ensure the orderly recovery of CCPs in various scenarios of financial distress. If recovery proves to be insufficient and resolution conditions are met, authorities will be required to take swift action to safeguard financial stability, ensure the continuity of the CCP's critical functions, and protect taxpayers.
The Commission notes its proposal seeks to align itself with international standards from CPMI-IOSCO and the Financial Stability Board (FSB), particularly related to cross-border instances of CCP resolution. It also makes clear it is the responsibility of the resolution authority to consider which tools or actions could have an impact on financial stability.
As outlined in its two most recent consultation submissions on the topic, (to the FSB and to CPMI-IOSCO) the WFE's position is that recovery should be given every opportunity to succeed, and that resolution should only be invoked as a last resort. CCPs and competent authorities should have appropriate tools and flexibility to enable this to happen, particularly in times of market stress.
Nandini Sukumar, CEO, WFE said: "We welcome the European Commission's proposal to be in broad alignment with international standards from CPMI-IOSCO and the FSB. Markets are global and the issues are global – WFE members across the world are focused on CCP recovery and resolution. The WFE maintains its position that while it is important to have well documented and suitably robust resolution plans, a CCP-led recovery is preferable for the broad markets rather than resolution. We will now work with our members in the WFE Post-Trade Working Group who represent different geographies and asset classes to forge consensus on the global industry view."