Version date: 2 October 2017 - onwards
CCP Question 22: Ongoing monitoring of collateral requirements [last update 2 October 2017]
Article 46 of EMIR and Article 37 of RTS on CCP requirements
Article 46 of EMIR and Article 37 of the RTS on CCP requirements - Ongoing monitoring of collateral requirements
Article 46 of Regulation (EU) No 648/2012 requires CCPs to accept highly liquid collateral with minimal credit and market risk to cover its initial and ongoing exposure to its clearing members. Article 37 of Commission Delegated Regulation (EU) 153/2013 requires CCPs to monitor on a regular basis the adequacy of their collateral policies and procedures, as new market developments may require changes.
a) What types of market developments should CCPs monitor?
b) How can CCPs ensure the monitoring of these market developments is efficient?
CCP Answer 22
a) With respect to the adequacy of collateral policies and procedures, CCPs should monitor on an on-going basis liquidity, credit risk, and market risk. In order to perform this monitoring, CCPs should have at their disposal at least the following tools:
i. tools to monitor liquidity, such as traded volumes, depth of the order book, bid-offers and central bank liquidity classes;
ii. tools to monitor credit risk, such as the credit monitoring of issuers, credit spreads and ratings; and
iii. tools to monitor market risk, such as price changes, back-tests of the collateral haircuts and implied or realised volatilities.