London, 17 October 2016 – The World Federation of Exchanges ("WFE"), which represents more than 200 market infrastructure providers including exchanges and CCPs, today published its response to the Financial Stability Board's (FSB) discussion note on the Essential Aspects of CPP Resolution Planning.
A summary of the WFE response is as follows:
- The WFE considers recovery is almost always preferable to resolution, but we welcome well-designed international efforts to enhance and strengthen how CCPs would be resolved in the event of a systemic crisis, such as the simultaneous default of several large global banks.
- The WFE supports further initiatives which encourage better planning by resolution authorities, particularly when they encourage international cooperation between regulatory bodies.
- Any resolution framework or guidelines need to retain sufficient flexibility, however, to ensure the continued smooth operation of the wider market in the event of a resolution situation.
Within that context, the WFE notes that:
- It is not likely that one single resolution strategy will be effective for all potential scenarios.
- Recovery must be given every opportunity to succeed.
- There is no benefit to limiting the tools available to a CCP in managing its own recovery.
- Existing obligations and incentive structures need to remain appropriately balanced, in order to support the CCP function in either recovery or resolution situations.
- The ultimate cost to end-users needs to be considered.
Nandini Sukumar, CEO, WFE, said: "First and foremost, we consider a CCP-led recovery to be preferable for the broad market than resolution. However, we support a principles-based approach - rather than prescriptions - to CCP resolution planning, which would facilitate a more integrated financial system. This would enable regulators and FMIs to consider and respond appropriately to the unique nature of the local markets they operate in."
Click here to read the WFE response in full.