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This response represents the views of EACH Member CCPs on the ESMA consultation on APC margin measures. In summary:
- In line with Article 41 of EMIR, CCPs should monitor margin levels and account for procyclical effects of margin revisions. We understand and welcome that regulators take a conservative approach to address potential liquidity issues in order to enhance financial safety and stability.
- Since APC measures currently lock up EUR 60bn of high quality collateral of clearing members and clients, EACH suggests that a fresh look is taken at APC measures through a cost-benefit analysis that considers whether APC measures should be should follow an outcomes-based or prescriptive approach. To ensure that there are no loopholes in the market and that APC measures function as desired, EACH strongly supports the application of APC measures beyond CCPs.
- Because of the diversity of products and markets cleared by CCPs, it is crucial that no one-size-fits-all approach is applied when considering APC measures. CCPs should be able to justify theis APC policy to their authorities.
- We encourage the guidelines to stress that the examples included are merely examples, rather than concrete proposals to be strictly followed in all markets notwithstanding the product and markets cleared.
- Managing procyclicality for all risk factors would likely be irrelevant and would potentially result in an extraordinary resource consuming exercise which would ultimately be a burden to the market. As an alternative, we would suggest an application to all relevant risk factors, regardless of the chosen APC margin measure from Article 28(1)
For more information, please find attached the EACH response or visit our website www.eachccp.eu
