EACH Responds To The BCBS-CPMI-IOSCO Consultative Report ‘Review Of Margining Practices’

The European Association of CCP Clearing Houses (EACH) has today responded to the BCBS-CPMI-IOSCO consultative report ‘Review of Margining Practices’. EACH welcomes the opportunity to provide feedback on this area and in summary responds with the following points:

• Margin call drivers – EACH generally agrees with the consultation paper’s assessment of the drivers behind margin calls, which match with EACH findings highlighted in the EACH Paper ‘CCP resilience during the COVID-19 Market Stress’.
• Need for further analysis and transparency of the uncleared space – EACH notes that while the consultative report adequately analyses in great depth the cleared space, the analysis of the uncleared space seems to be rather limited (42 vs 6 data charts on the cleared and uncleared spaces respectively). EACH believes that further data analysis on the uncleared space is needed to provide an accurate picture that results in robust conclusions. On a similar note, EACH would encourage the creation of a Public Quantitative Disclosures requirement for Clearing Members and Clients to further facilitate transparency in financial markets.
• Concerns about VM pass-through – EACH stresses that a VM pass-through is not welcomed by European CCPs and should be avoided at all costs. It would be legally, in addition to operationally, challenging to do so, and would result in the un-netting of intraday payments with the associated risk and operational burden.
• EACH suggestions – EACH members also suggests a number of changes that can be made in the context of the consultative paper:
  1. Intra-day (ITD) margin-calls – EACH makes a number of suggestions aimed at alleviating the liquidity strain of ITD margin-calls.
  2. APC measures – EACH highlights a number of potential improvements and considerations relating to a review of APC.
  3. Additional Clearing Member disclosures – EACH highlights that CCPs already provide Clearing Members with a wide range of data, but agrees with the consultative report’s comment that the role which clearing members can play to facilitate transparency for their clients should also be considered.
  4. Central Bank Access – EACH highlights that CCP access to Central Bank facilities constitutes a key component that should be supported by policy makers in the interests of financial stability and integrity.

For more information, please see our paper (available via this link) or visit the EACH website at www.eachccp.eu