LCH.Clearnet suspends interoperability work as watchdogs probe r. LCH.Clearnet has suspended plans to begin offering clearing services across a range of execution venues next week due to regulatory concerns about systemic weaknesses in clearing house interoperability arrangements. The London-based clearing house alerted the market to the problems in a letter to shareholders in which it said regulators had expressed concerns regarding "inter-CCP margin requirements". "It has not yet been possible to obtain full details of the concerns and the regulators are, for now, reviewing the agreements," the letter continued.
"Until regulatory 'non-objection' has been obtained, it will not be possible to offer clearing services on an interoperable basis to any further trading venues. " LCH.Clearnet was to begin offering clearing services to Chi-X, Bats, Turquoise and Nyse Arca after agreeing interoperabilty deals with their respective central counterparties. LCH.Clearnet and SIX x-clear interoper. LCH.Clearnet Limited and SIX x-clear Ltd have published a summary link agreement which provides the framework for successful interoperability across Europe. The existing interoperability arrangement between the clearing houses which serves the London Stock Exchange (LSE) and SIX Swiss Exchange uses this link agreement. The agreement is based upon a proven model which successfully withstood the Lehman default. The model has been designed to minimise the risk of contagion by safeguarding the assets of the non-defaulting CCP and its members.
Key features include: Integrity of risk management: * Each CCP retains the authority to determine the eligibility of trades for clearing * Margining process preserves the integrity and safeguards of each CCP Protection from contagion in the event of a default: * 'Defaulter pays' model ensures protection for non-defaulting CCP and its members * Distinct default funds minimises contagion in the event of a CCP default Add your Company to AlgoWorld. Back Office News | EuroCCP outlines interoperability recommendat.
Market fragmentation has created considerable challenges for all market participants, not least in the area of clearing. A lot has already been written and said about the need for full interoperability between central counterparties ("CCPs") if the objectives of MiFID are to be fully realized. However, the situation remains opaque at best, with the industry still struggling to evolve a workable plan for dealing with issues such as the risk management of trading entities, effective cross margining between venues, and ultimately managing the default risk of the CCP's themselves. EuroCCP today published a white paper outlining four key recommendations to deal with these issues. Each CCP should augment its own existing default fund to cover potential close-out losses in the event of an interoperating CCP's default.
The full report can be viewed here. Watch EuroCCP's CEO, Diana Chan introduce the report in this short video presentation. Add your Company to AlgoWorld. EuroCCP calls for pan-Europe accord on clearing. Clearing Counterparties and Risk Management. EMCF - working on new approach to clearer links. EMCF Welcomes Regulator Move To Set Up Interoperability Mechanis.