On September 26, ISDA and the FIA responded to the CFTC’s notice of proposed rulemaking on derivatives clearing organizations’ (DCOs) recovery and orderly wind-down plans.

The associations acknowledge that CCP recovery, resolution and wind-down planning is paramount to preserving financial stability. They also welcome the CFTC proposal, which is well-balanced as it outlines a comprehensive analysis for DCOs, while preserving the flexibility required to adapt to changing circumstances.

The response advocates for:

• A requirement to limit clearing members’ CCP exposures during recovery and resolution;
• Non-default losses to be borne by CCPs;
• Clearing participants incurring losses due to use of recovery measures should be fairly compensated via future CCP profit sharing;
• Clearing participants to be adequately involved in the design phase of such recovery and wind-down plans;
• Within their plans, DCOs to meticulously assess any potential impact of all measures (such as the use of specific recovery tools) on clearing participants and other stakeholders.

The response to the CFTC consultation can be found here.