The International Organization of Securities Commissions (IOSCO) and the Committee on Payment and Settlement Systems (CPSS) have announced the setting-up of a working group to review the application of the 2004 CPSS-IOSCO Recommendations for Central Counterparties to clearing arrangements for over-the-counter (OTC) derivatives.
The recommendations, which were developed by the CPSS and the IOSCO Technical Committee, set out standards for risk management of a central counterparty.
Both the private and the public sector have made efforts to improve bilateral clearing and settlement arrangements for Over The Counter (OTC) derivatives transactions. There are now a number of existing, newly established and proposed central counterparties (CCPs) which provide central clearing and settlement services for OTC credit default swap (CDS) transactions, interest rate swaps, and other OTC derivatives.
The CPSS and IOSCO see the growth of centralised clearing facilities as a positive factor in reducing systemic risk in financial markets. The working group will discuss and propose guidance on how CCPs may implement the existing recommendations, as well as proposals for strengthening them where necessary.