In March 2014, the SEC issued for comment a Proposed Rule providing for set standards for Covered Clearing Agencies. The Proposed Rule would establish heightened standards for the operation and governance of registered clearing agencies that meet the definition of “covered clearing agency,” including certain systemically important clearing agencies. On May 27, TCH filed its comment letter to the SEC highlighting key areas of concern and offering a range of recommended changes intended to further minimize the potential systemic risks that CCPs may pose. Among other things, the letter suggests the SEC should revise its proposal to: (i) require CCPs to adopt rules specifying the consequences of scenarios in which losses suffered by CCPs due to the default of a clearing participant exceed the resources of the CCP designed to absorb such losses; (ii) require CCPs to put a meaningful level of its own capital at risk in the default waterfall before losses are mutualized among non-defaulting participants; (iii) provide additional guidance on acceptable types of collateral; (iv) establish minimum liquidation periods for initial margin calculation that are consistent with international standards; and (v) require CCPs to maintain clearing or guaranty fund contributions separate from participants initial margin requirements.
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