Analysis of Central Clearing Interdependencies

This report by the Financial Stability Board, the Committee on Payments and Market Infrastructures, the International Organization of Securities Commissions and the Basel Committee on Banking Supervision maps interdependencies between central counterparties (CCPs) and clearing members and other financial service providers. The international standard-setters published a first report on central clearing interdependencies in July 2017.

To assess whether the findings of the July 2017 report were stable over time, the international standard-setters conducted another more streamlined data collection (as of October 2017) from the same 26 CCPs. The results are broadly consistent with the previous analysis with the data as of September 2016 and show that:

• Prefunded financial resources are concentrated at a small number of CCPs.
• Exposures to CCPs are concentrated among a small number of entities.
• The relationships mapped are characterised, to varying degrees, by a core of highly connected CCPs and entities and a periphery of less highly connected CCPs and entities.
• A small number of entities tend to dominate the provision of each of the critical services required by CCPs.
• Clearing members and clearing member affiliates are also important providers of other critical services required by CCPs and can maintain several types of relationships with multiple CCPs simultaneously.

There are, however, some changes to highlight in the interdependencies in central clearing. For instance, the concentration of client clearing activity has decreased. Compared with the last report, initial margins from clients are now concentrated in two CCPs, compared to only one with the data as of September 2016.

The analysis of interdependencies in central clearing is intended to provide useful inputs for designing supervisory stress tests and has informed the policy work as set out in the  joint CCP workplan to promote CCP resilience, recovery and resolvability. The standard-setters published a report on the implementation of the workplan in July 2017.