Market Risk Advisory Committee

CFTC’s Market Risk Advisory Committee
1155 21st Street, N.W.
Washington, DC 20581

November 2, 2015


Presentation of the CCP Risk Management Subcommittee’s Recommendations on Enhancing CCPs’ Preparations for the Default of a Significant Clearing Member

Welcome and Remarks

Panel 1: Recommendation # 1 - Interdependencies Among CCPs and Key Intermediaries/Markets
Moderator: Susan O’Flynn

Issue Description:

    “CCPs may depend on their largest clearing members (or affiliates of those entities) for an array of products and activities that are also essential to the smooth functioning of the default management process. Clearing members (or their affiliates) may act in key capacities as providers of liquidity facilities, as counterparties in the repo markets, as counterparties to macro-hedging transactions, or as providers of cash or collateral custodian services.”


  • Generally, what kinds of services are clearing members providing to clearinghouses?
  • How do, or could, CCPs incorporate partial loss of these services into default drills?
  • How do CCPs assess their dependence / exposure to individual clearing members (including services)?
  • How do clearing members assess their exposure to individual clearinghouses across these various services?
  • Are there better alternatives to the current structure that would lessen interdependency risk?
  • What role, if any, should the Commission play in addressing these issues?

Panel 2: Recommendation #2 - Portability and FCM Resource Availability
Moderator: Susan O’Flynn

Issue Description:

    “CCP default management plans and drills may not adequately consider the feasibility of porting customer accounts with respect to (i) the financial resource capacity (i.e. balance sheet, capital, etc.) or the willingness of the remaining solvent clearing members to absorb new customers and (ii) the operational, technological, legal documentation and communication challenges associated with the porting of customer accounts. In addition, porting customer positions and collateral from a defaulting clearing member is dependent upon obtaining requisite approvals from a bankruptcy court, which adds additional uncertainty with respect to timing and process.”


  • Given the increasing concentration of Futures Commission Merchants (FCMs), what is the likelihood that all of the positions of a defaulting significant clearing member could be ported today?
    • o What are the operational and regulatory impediments to porting?

      o How could CCPs better incorporate porting into default drills?

  • Why aren’t more entities, particularly non-bank entities, becoming FCMs?
  • o Are there initiatives that would make being an FCM more attractive to less traditional entities?

  • Is self-clearing a possible alternative to the traditional FCM model?
  • What role, if any, should the Commission play in addressing these issues?

Overview of Recommendations #3-5

Panel 3: Other Suggestions – The Buyside Perspective
Moderator: Gerald Beeson
Guest Panelist: William Thum, Vanguard

Closing Remarks

Market Risk Advisory Committee Members

For further information contact: Petal Walker, Chief Counsel, Office of Commissioner Bowen, at (202) 418–5794 or [email protected]