Clearing has become a critical part of the derivatives landscape, with more than three quarters of interest rate derivatives notional outstanding now cleared through central counterparties (CCPs). Market participants have embraced the operational and cost efficiencies that clearing offers, and are now clearing more than what is required by regulatory mandates.

Despite this shift to clearing, work is still required to implement a robust framework for CCP resilience, recovery and resolution. Given the systemic importance of CCPs, ISDA urges regulators and policy-makers to continue working together to finalize unambiguous and predictable CCP recovery and resolution strategies. More politically driven topics – for instance, the debate over CCP location in the European Union and the change of administration in the US – should not distract from this important work.

This paper makes a number of recommendations for a comprehensive CCP recovery and resolution framework that would ensure CCPs can withstand severe market stress. In doing so, ISDA recognizes that these strategies will necessarily have to vary by jurisdiction and by CCP, based on different CCP structures and existing legal regimes.

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