By Gabriel Surprise
December 8, 2014, GlobalCapital
Commodity Futures Trading Commission Commissioner Mark Wetjen claimed that central counterparty risk mitigation and management strategies need enhanced coordination and harmonization of rules in order to be effective with more concentrated risk. However, legislative bodies should take the potential negative ramifications associated with CCP harmonization and the centralization of counterparty risk into account before pursuing new rules, according to lawyers.
Speaking at the FIA Asia Derivatives Conference in Singapore last Thursday, Wetjen commended global progress on CCP risk mitigation strategies based on margin and collateral requirements, noting they had achieved better counterparty risk mitigation, transparency and capital efficiency through portfolio netting. Despite these gains, he called for further global cooperation in CCP reform, particularly with within the spaces of standardised stress tests, contagion risk mitigation, asset allocation in insolvency waterfalls, and mutualisation of recovery fund contributions
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