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."