The European Securities and Markets Authority (ESMA) clarified that CCPs should include, in the measurement of their liquidity needs, the default of their top two clearing members in all their capacities vis-à-vis the CCP, in addition to assessing in their stress testing scenarios all entities towards which the CCP has a liquidity exposure. ESMA published an opinion that sets out how central counterparties (CCPs) in the EU should consider in their internal risk models the liquidity risk posed by all entities towards which the CCP has a liquidity exposure, such as liquidity providers. The opinion, published under the European Markets Infrastructure Regulation (EMIR), outlines how CCPs should assess liquidity risk, and by so doing promotes convergent risk management practices and risk control across EU. It also outlines the assessment of the liquidity risk posed by liquidity providers regardless whether or not they are a clearing member. ESMA’s opinion is addressed to competent authorities responsible for CCP supervision.
