|Recommendation 2: Participation requirements||Due to the unique position of LCH.Clearnet SA, as a single CCP serving the French financial markets, an applicant should have the possibility to appeal to a third party (cf. competent authority) rather than addressing a court, which is a lengthy process, to solve litigation linked to the refusal of a membership.|
|Recommendation 3: Risk management||LCH.Clearnet SA should measure its exposure continuously throughout the business day, i.e., exposure is calculated continuously intraday once the positions, the participants, or the prices of the products have changed.|
For fixed-income instruments, LCH.Clearnet SA should use intraday prices for the calculation of its exposures.
The triggers for additional intraday margin calls for exchange traded equities should be formalized with specific procedures and policies.
|LCH.Clearnet SA should develop a mechanism that allows the calculation of margin call for CDS on the same day prices rather than the prices of previous day.|
|Recommendation 4: Margin requirements||Improvements are still needed in automation, trailing and accuracy in parameters’ calculation.|
To enhance transparency and reduce uncertainty, LCH.Clearnet SA should formalize its policy to address wrong way risk.
LCH.Clearnet SA should commission an independent review of its risk models for all its products and not only for CDS.
Intraday margin call should also be applied on cash equity.
|Recommendation 6: Default procedures||LCH.Clearnet SA should introduce a mechanism to allow the segregation between the clearing member’s proprietary assets and its clients’ assets when the segment is developed for CDS contracts.. LCH.Clearnet SA should introduce an operational segregation mechanism for all fixed-income products.|
|Recommendation 8: Operational risk||An external audit of the business continuity plan should be carried out annually.|
LCH.Clearnet SA should formalize the external audit of the operational risk of the outsourced activities.
The relevant authorities should formalize the assessment of the operational risk of the insourcing companies, including on-site inspection.
The business continuity plan should be tested regularly with participants.
A feasibility study, including cost assessment, should be undertaken by LCH.Clearnet SA to reduce the Recovery Time Objective (RTO) from four hours to preferably less than one hour.
|Recommendation 9: Money settlements||Once the volume of non-euro payments in commercial bank money increases, LCH.Clearnet SA should carry out an assessment of the finality of these payments.|
|Recommendation 11: Risk in links||LCH.Clearnet should collect adequate level of additional margin from CC&G as contribution to the default fund is not made.|
LCH.Clearnet SA should ensure that the collateral provided to CC&G is safely invested by minimizing credit and liquidity risks.
|Recommendation 13: Governance||It is important to ensure that the transformation plan that will lead to further integration of the clearing activities within the Group would not erode the decision making process at the level of LCH.Clearnet SA with an adverse impact on managing the risks and meeting the needs of the local market.|
|Recommendation 15 Regulation and oversight||BDF should be empowered to issue regulation and undertake measures to effectively enforce its oversight responsibility.|
ACP and AMF should produce a policy note clearly defining and publicly disclosing their respective objectives, roles and responsibilities with regard to the soundness and efficiency of LCH.Clearnet SA.
|To increase transparency and accountability, the three involved competent authorities—BDF, AMF and ACP—should produce a joint policy note clearly defining and publicly disclosing their respective objectives, roles and responsibilities with regard to the soundness and efficiency of LCH.Clearnet SA.|