On 24 January 2019, the International Swaps and Derivatives Association (ISDA) published a paper containing a set of clearing risk management best practices for central counterparties (CCPs).

The overriding principle guiding these recommendations is the importance of ensuring that CCP risk management for a given cleared product is appropriately aligned with its risk profile. This should be the primary factor driving how CCP’s formulate and implement their risk management frameworks.

The ISDA and its members call for broad-based implementation of these best practices to ensure that CCPs have:

  • risk controls and margin requirements that adapt to concentration, liquidity, member credit quality and wrong-way risk in a member’s portfolio;
  • effective and transparent default management processes; and
  • robust membership criteria and greater assurances of continued adherence to them.