Central counterparties are continuing talks to reach an agreed model of interoperability. UK, Dutch and Swiss regulators put a stop to interoperability in late 2009 in order to review the linkage agreements. CCPs have since been busy discussing various models before regulators meet again in April 2010.
According to those close to the talks, “there is enough common ground to reach a consensus. We should get a model soon.”
LCH.Clearnet, the European Multilateral Clearing Facility (EMCF), EuroCCP and SIX x-clear are the major participants in the discussions.
Regulators have been eager to point out interoperability between CCPs would increase counterparty risk, and that this increase could be covered by the posting of additional collateral by CCP members.
However the regulators have stopped short on how much collateral would be needed, and how this collateral would be managed.
Talks amongst CCPs have been continuing for some weeks, but according to a participant of the talks, questions on the amount of client collateral, scalability of the interoperability models, and whether client collateral could be hypothecated remain sticking points.
Not all members have been so enthusiastic about reaching a conclusion. Another participant in the talks stated that although the CCPs are narrowing the models down, there is no common approach. Any agreement has been made harder because the CCPs “don’t know what the regulators really expect.”