The Division of Clearing and Risk (DCR) of the Commodity Futures Trading Commission has issued a report summarizing stress tests conducted by three derivatives clearing organizations (DCOs): the Chicago Mercantile Exchange (CME), ICE Clear US (ICUS) and LCH Ltd (LCH). During the stress tests, DCR evaluated whether each DCO could obtain, in a timely manner, the funds necessary to meet the settlement obligations resulting from the simultaneous default of two large clearing members. DCR also evaluated whether the need for liquidity at multiple DCOs under such circumstances might have systemic implications.
DCR determined that all the DCOs demonstrated the ability to generate sufficient liquidity to fulfill settlement obligations on time. Similarly, DCR concluded that the cumulative size of liquidity requirements in the test scenario would not impair the ability of each DCO to meet its settlement obligations.
The tests included futures and options on futures cleared at CME and ICUS, and interest rate swaps cleared at LCH and CME.
DCR’s report is available here.