Teeth-gritting selections from the latest CPSS-IOSCO comment letters on CCPs

CPSS-IOSCO recently released the comment letters it received in response to the Consultation Report “Public Quantitative Disclosure Standards for Central Counterparties.” Several of these letters have some not-so-thinly veiled tensions underpinning them and encourage CPSS-IOSCO to look towards the Fed’s Payment Risk Committee. Here are some excerpts:

CCP-12 (an association of CCPs) and CME: “The quantitative disclosure requirements should not include any information that could result in the disclosure of confidential and proprietary information of the [Financial Market Infrastructure], its clearing members or clients.” This will be the big fight: CCPs argue that data are confidential but regulators want access. Its an open question how these two highly conflicting goals get reconciled.

Eurex follows up with a similar argument: “The right balance must be established between confidential information disclosed to regulatory authorities only to enable them to conduct effective supervision on the one hand and information disclosed to participants and the public on the other hand. In this respect the consultation paper is not transparent on which objectives are pursued with the very far-reaching and detailed information to be disclosed.”

It is fair to say that Eurex then slams CPSS-IOSCO by noting that: “Eurex Clearing is of the impression that the level of detail of the information to be disclosed publically goes far beyond the EMIR and Dodd Frank Act requirements on disclosure by CCPs and even beyond the CPSS-IOSCO disclosure framework that was released in combination with the assessment methodology in December 2012. Furthermore, Eurex Clearing deems the consultation paper as partly inconsistent or overlapping with the current work performed by the Payment Risk Committee (PRC).” Note: The PRC is sponsored by the Federal Reserve Bank of New York.

On the more diplomatic side, the DTCC counts multiple concerns with the CPSS-IOSCO disclose framework, effectively that the information is both highly sensitive and highly confusing to non-trained professionals. Their solution comes back to the PRC: “The proposed [CPSS-IOSCO] Disclosure matrix requires even more granular data than that provided in the PRC Recommendations…. Virtually all of the quantatitive data that is recommended for disclosure by CCPs in the PRC Recommendations is to be disclosed only to the CCPs members, and then limited further, in many cases, to only those individuals in such firms who perform risk management functions…”

ISDA also notes the Payment Risk Committee guidelines as a good way to go: “We believe the PRC Report would be useful to inform CPSS-IOSCO on the form and level of detail agreed upon by clearing members and CCPs.”

Thomas Murray weighs in, represented by our good friend Thomas Krantz: “Given the complexity of this environment and the diversity of clearing house circumstance…” we “would not yet say that this reporting will enable the authorities to understand [CCPs] as well as we might wish.” Our read there is that the public quantitative disclosures are not the answer that CPSS-IOSCO hope they will be. Thomas Murray is also promoting its own CCP assessment program.

Clearly the CCPs are very unhappy with the CPSS-IOSCO recommendations. A snarky alternative title to this post would have been “CCPs to CPSS-IOSCO: *$/# off.”

The original Consultation Paper and the comment letters are available here.

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