MFA, the American Council of Life Insurers, Investment Company Institute, and Securities Industry and Financial Markets Association’s Asset Management Group (Associations) jointly submitted a letter to the CFTC, FDIC, SEC and Treasury on standards for central counterparties (CCPs) that we believe regulators should impose domestically and endorse through international bodies to support financial stability in derivatives markets. In the letter, the Associations make a number of recommendations that broadly include the following:
- To support CCPs and reduce the likelihood of their failure, regulators should strengthen minimum funding requirements and risk management processes to foster CCP resiliency.
- Regulators should require CCPs to provide expanded public disclosure that is reliable, readily available, and comparable.
- When a CCP is in recovery (rather than resolution), regulators should require CCP recovery standards to provide full protection of customer interests.
- Regulators should require CCPs to have clear protocols for the porting of customers’ positions, LSOC treatment for all customer collateral, and rationalized capital requirements that recognize the exposure-reducing effects of posted initial margin.
- When a CCP is placed into resolution, the CCP resolution should proceed based on clear protocols that balance market and systemic interests with customer protections.
- Regulators should make clear that a CCP and its parent company have the sole responsibility for non-default losses by the CCP.
