CPMI and IOSCO Update Report on CCP Implementation of PFMI

The Committee on Payments and Market Infrastructures ("CPMI") and IOSCO updated a study on ten derivatives CCPs attempts to implement the Principles for Financial Market Infrastructures ("PFMI"). The update reviews the progress made by central counterparties ("CCPs") to address areas of financial risk management and recovery practices (as identified previously).

In the report, CPMI and IOSCO found that participating CCPs demonstrated progress toward reaching standards set in PFMI. The report noted that other CCPs have failed to implement the "full set of recovery rules and procedures" recommended. Most of those CCPs have demonstrated "gaps and shortcomings" in credit and liquidity risk management. Some have not yet established procedures that will maintain the required level of financial resources on an ongoing basis.

In highlighting these shortcomings the CPMI and ISOCO stated that:

"some CCPs are still failing to implement a number of measures in the areas of risk management and recovery planning. The failure of these CCPs to implement practices constitutes, in certain instances, serious issues of concern and warrants immediate attention. . . . The fact that, following the publication of the initial Level 3 report, some CCPs continue to lack sufficient liquidity-specific scenarios is a serious issue of concern that the relevant CCPs should address with the highest priority."

The CMPI and IOSCO encouraged those CCPs to prioritize the establishment of these rules and procedures.