CFTC Seeks Stress Tests Input


Having administered two stress tests of central counter-party clearers under its belt, the US Commodity Futures Trading Commission plans to open the development of future tests in the coming year.

Christopher Giancarlo, CFTC

“We intend to put what we learn from each test into the design of future tests,” said CFTC Chairman Christopher Giancarlo during his keynote at the ISDA Regulators and Industry Forum in Singapore. “The goal is to establish a stress testing regime that is thorough, data-driven, econometrically sound and reflective of multi-CCP operations and their role in dynamic market ecosystems.”

The regulator looks to draw upon the insights from fellow prudential and market regulators as well as subject-matter experts like economists and academics to further develop its testing regime.

Giancarlo particularly would like the Federal Reserve Board to participate in its program since the FRB supervises the systematically important derivatives clearing organizations CME Clearing and ICE Clearing Credit.

The CFTC also seeks input from the Securities and Exchange Commission and the Federal Deposit Insurance Commission, which is the resolution authority under Dodd-Frank, he noted.

“Governor [Jerome] Powell and I have established an inter-agency task force to see it through,” said Giancarlo. “We will take the same approach with the regional Federal Reserve Banks in New York and Chicago. Additionally, my staff and I also met recently with Chairman [Martin} Gruenberg and his team at the FDIC to further similar cooperation.”

In the meantime, the three of the leading clearinghouses–CME, ICE Clear Credit, and the LCH–passed the CFTC’s second multi-CCP stress test.

Each was able to generate sufficient liquidity to fulfill settlement obligations during the immediate end-of-day cycle, and in the case of those clearing interest rates swaps, during subsequent payment cycles.

“In addition, the test concluded that, in instances where multiple CCPs used the same methods or the same firm to raise funds, the cumulative size of liquidity requirements would not have impaired the ability of each CCP to meet its settlement obligations on time,” said Giancarlo.

Related articles

  1. CEDX is planning to expand its range of products in 2023, subject to regulatory approvals.

  2. The CFTC regulated derivatives market and clearer was not included in FTX's bankruptcy filing.

  3. Schroders cleared NDF trades across a Asian and Latam currency pairs via Citi.

  4. The derivatives venue owned by FTX wanted to offer products that were not fully collateralized.

  5. Trading Europe From ‘Across the Pond’

    Cboe acquired EuroCCP on 1 July 2020.