Clearinghouse Safety on CFTC Panel’s April Meeting Agenda

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By Richard Hill

Clearinghouse safety, the health of derivatives markets and cybersecurity are on the agenda for a CFTC Market Risk Advisory Committee April 25 meeting, the agency said.

The committee will discuss the Commodity Futures Trading Commission staff’s response to its recommendations for how clearinghouses can better prepare for a default by one of their members.

Clearinghouse safety has become a priority for global regulators since they began requiring standardized exchange-traded swaps to be cleared, potentially concentrating trillions of dollars worth of risk at the central counterparties. Some of the largest clearinghouses in the U.S. are operated by CME Group Inc., Intercontinental Exchange and Options Clearing Corp.

At its last meeting in November, the committee recommended that derivatives clearinghouses be required regularly to conduct joint “fire drills” simulating the default of a large member. Clearinghouses also should maintain a directory of their members’ key default-management officials, and allow non-clearinghouse members to bid on portfolios that are in default, the committee recommended.

Marketplace Health

MRAC also will explore how well the derivatives markets are currently functioning and assess how risk is transferred across market participants.

The health of the derivatives marketplace has become a priority under acting CFTC Chairman J. Christopher Giancarlo. The CFTC “must get smarter by focusing on current and emerging market structure and dynamics,” he said at an industry conference earlier in March.

Cybersecurity also is a top priority for the agency and the marketplace. The CFTC adopted new cybersecurity rules in September. But one cCommissioner, Sharon Bowen, has already said those rules already may need to be strengthened.

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