The recent stress tests examined the adequacy of clearinghouses' resources to complete clearing and settlements under a large set of stress scenarios, reflecting severe but plausible market price shocks.
Each of the regulators examined the clearinghouses' ability to withstand larger numbers of clearing member defaults and considered their ability to satisfy the Cover 2 principle, as set out in PFMI-IOSCO recommendations.
Notably, the regulators who drafted the original HIPAA Privacy Rule in 1999 anticipated the restrictive nature of the business associate status for clearinghouses. The preamble of the proposed HIPAA rule noted, "As technology improves it is likely that clearinghouses will find ways to take advantage of databases of protected health information that aggregate records based on the individual subject of the information.
Legislation would remove the BA designation from clearinghouses
Andrea Coscelli, CMA Executive Director of Markets and Mergers, and decision-maker in the phase 1 investigation, said, "ICE is the leading exchange for energy trading in the UK, and in Europe, and based on the evidence weve gathered, it may have the ability and incentive to increase prices and/or reduce the quality of Trayports software products and services on which its rivals are dependent in order to divert trading from rival exchanges, OTC brokers and clearinghouses
to its own exchange and clearinghouse
, and/or in order to protect its market position from increased competition.
Regulation was one of the first to criticize such thinking in an article by University of Houston finance professor Craig Pirrong ("The Clearinghouse
Cure," Winter 2008-2009).
July 2010, derivatives clearinghouses will play a central role in
regulated clearinghouses; for these products, the clearinghouses will
Much recent regulatory activity has focused on enabling, enhancing, and requiring clearinghouses for these kinds of financing arrangements.
After the company needing currency-risk protection makes its euro-dollar trade with a bank, each of them turns its side of the trade over to the clearinghouse. The resulting obligations between the company and bank become obligations to and from a middleman, the clearinghouse.
In a statement LCH, Europe's largest independent clearinghouse
, said it has 'received various proposals indicating an interest in pursuing some form of possible business combination or other cooperation.'
sector, there is potential for other similar clearinghouses