Last week ISDA announced the publication of a set of key principles on the adequacy and structure of central counterparty (CCP) loss-absorbing resources and on CCP recovery and resolution.
The role of the clearing house has evolved and now they are a crucial part of the derivatives market infrastructure. The ISDA principles for CCP recovery paper identifies the key issues that need to be addressed and makes several recommendations on how to proceed under these headings:
- Transparent risk management standards, practices and methodologies
- Mandatory, standardised and transparent stress testing
- Significant CCP SITG
- Clearly defined CCP recovery plans
- Clearing service termination or resolution