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Clearing: ISDA Proposes CCP Recovery and Continuity Framework 

January 28, 2015

John D'Antona Jr., Traders Magazine 

The International Swaps and Derivatives Association, Inc. (ISDA) announced the publication of a new position paper that sets out a proposed recovery and continuity framework for central counterparties (CCPs), should one default.

In the paper, "CCP Default Management, Recovery and Continuity," ISDA wrote clearing houses have become vital to derivatives market infrastructure following the implementation of new regulations that require standardized over-the-counter derivatives to be cleared. As a result of their systemic importance, CCPs are required to develop recovery plans to avert a threat to their viability and ensure they can maintain the continuity of critical services without requiring the intervention of resolution authorities or resorting to public money.

The paper proposes a framework for recovery and sets out tools that can be used to re-establish a matched book following the default of one or more clearing members. The paper does not cover non-default losses and those relating to liquidity shortfalls.

Read More: Traders Magazine

 
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