Trading Industry Calls for More Regulation on Clearinghouses

Trading IndustryA number of leading banks have endorsed and joined as signatories of a buy- and sell-side paper calling for regulatory action to make clearinghouses safer. ABN AMRO Clearing, Barclays, Deutsche Bank, Commonwealth Bank of Australia, Franklin Templeton, Guardian Life, Ivy Investments, Nordea, TIAA and UBS now stand behind the paper which was originally published in 2019.

Clearinghouses have been increasingly relied upon to protect market participants from counterparty losses when faced with major market shocks. The paper supports the further enhancement of the safety and soundness of CCPs by better aligning incentives between clearinghouses and market participants and ensuring that clearing member and end-user liabilities are manageable.

The paper – entitled a “A Path Forward for CCP Resilience, Recovery and Resolution” – was first backed by Allianz, BlackRock, Citi, Goldman Sachs, JPMorgan Chase & Co., Societe Generale, State Street, T. Rowe Price, and Vanguard.

Gert Ellerkmann, Global Risk Governance & Strategy Specialist at ABN AMRO Clearing Bank, commented: “The recommendations help to align the incentives of clients, clearing members and CCPs and to strengthen financial markets stability.”

Atanas Goranov, Derivatives Risk Officer at The Guardian Life Insurance Company of America, said: “Central clearing has made the derivatives market more stable, but it has also increased dependence on central clearing counterparties and created a concentration of risk. Taking additional steps to ensure that risk is well managed is beneficial to all parties and the market as a whole.”

Andrew Whiteley, Head of Funds Risk at Barclays, said: “We look forward to joining this important joint sell side and buy side initiative to improve CCP resilience, with the goal to enhance financial stability during times of market disruption.”

Jonathan Siegel, Vice President & Senior Legal Counsel at T. Rowe Price, said: “The whitepaper lays out a comprehensive set of recommendations to better align incentives and strengthen the CCP framework so that the resiliency of this important market function can be further enhanced. We are pleased that such a diverse set of market participants have come together to support the paper and we look forward to the next phase of advocacy on this initiative.”