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How would the creation of a recovery framework for central counterparty clearing houses (CCPs) achieve greater transparency and financial stability? Farid Anvari, Of Counsel at Baker & McKenzie, comments on proposals for loss distribution and recovery of a CCP after it has suffered member-default losses.
ISDA proposes new recovery framework for defaulting CCPs
A CCP Default Management, Recovery and Continuity paper proposes a framework for central counterparty clearing houses’ (CCPs) recovery and sets out the tools that can be used to re-establish a matched book following the default of one or more clearing members. Produced by the International Swaps and Derivatives Associations (ISDA), the paper outlines measures that are consistent with the recommendations made by the Committee on Payments and Market Infrastructures and the International Organisation of Securities Commission in October 2014.
The systemically important nature of several CCPs, along with the very large losses which CCPs can suffer relative to their capital, necessitates a formal framework for CCP recovery—particularly if taxpayers are not to bear a heavy burden for bailing them out. Ultimately, CCPs are essential to wholesale financial markets so a framework for dealing with CCPs which are at risk of failure and ensuring continuity of that CCPs’ services to the market would significantly improve financial stability.
ISDA has put forward a set of proposals for loss distributi
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1.Banking and finance lawyer with experience in derivatives, debt capital markets, securitisation and structured finance in London and Paris
2.Likes ballet, playing the harp and holidays
3.Thinks the law is always changing!
Emma trained and qualified at Allen & Overy LLP and worked in their derivatives and structured finance teams in London and Paris. She then joined the foreign exchange prime brokerage legal team at Deutsche Bank before spending 4 ½ years with Crédit Agricole CIB advising the fixed income and derivatives desk.
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