Concurring Statement of Commissioner Sharon Y. Bowen Regarding the Division of Clearing and Risk’s Memorandum to All Registered Derivatives Clearing Organizations Regarding Recovery Plans and Wind-down Plans Maintained by Derivatives Clearing Organizations and Tools for the Recovery and Orderly Wind-down of Derivatives Clearing Organizations
July 21, 2016
This staff memorandum provides thoughtful recommendations on central counterparty (CCP) recovery and wind-down. As Sponsor of the Market Risk Advisory Committee (MRAC), I have been a part of a number of public discussions on these crucial issues, including the committee’s very first meeting in 2015, which focused on CCP resilience in the event of a default of a significant clearing member.
As I’ve noted in the past, the increased use of clearing is a success story.1 Clearing takes the decision-making about the appropriate collateralization of standardized derivatives products out of the hands of individual counterparties – many of whom were woefully under-collateralized in 2008 – and puts it in the hands of highly regulated intermediaries that can monitor risks across the markets while allowing the Commission easy, centralized access to that information to enable our oversight.
While I appreciate the benefits of clearing, I also believe that we need to continue to be diligent about ensuring that these CCPs are risk managing appropriately. And this memorandum, along with the ongoing oversight of our committed staff of the Commission, goes a long way in meeting that goal.
1 E.g., Speech of Commissioner Sharon Y. Bowen at George Washington Law, 2016 Manuel F. Cohen Lecture (Feb 4, 2016), available at http://www.cftc.gov/PressRoom/SpeechesTestimony/opabowen-8.
Last Updated: July 21, 2016