CPSS and IOSCO Issue Advisory Document on Quantitative Disclosure by Central Counterparties (with Lofchie Comment)

The Committee on Payment and Settlement Systems ("CPSS") and IOSCO published for public comment a consultative document titled "Public Quantitative Disclosure Standards for Central Counterparties" ("CCP").The consultative paper complements a previous paper by the CPSS and IOSCO from 2012 which provided guidance on what should be disclosed by central counterparties and other financial market infrastructures. The proposed disclosures in this document are intended to provide a means for enabling stakeholders, authorities, participants, and the public to:

• compare CCP risk controls;
• have a clear, accurate and full understanding of the risks associated with a CCP;
• understand and assess a CCP's systematic importance and its impact on systemic risk; and
• understand and assess the risks of participating in CCPs.

Comments are due by December 13, 2013.

Lofchie Comment: In promoting the central clearing of derivatives, the CFTC has promoted the safety of clearing. While there are arguments to be made for clearing, it also has real risks, as pointed out in the attached publication. There is little that market participants can actually do with the information. Given that swaps are required to be cleared, and there are very few choices as to where any individual swap can be cleared, worrying about the risk posed by a particular clearing agency may be fruitless. Simply, the risk of using a clearing house is imposed on the market by the government.

See: IOSCO and CPSS's Joint Publication: Public Quantitative Disclosure Standards for Central Counterparties; IOSCO Announcement; IOSCO Press Release.