CME Clearing, ICE Clear U.S. and LCH Ltd. will be able to generate sufficient liquidity to fulfill settlement obligations on time in a hypothetical extreme but plausible market scenario, said the U.S. Commodity Futures Trading Commission.
The liquidity stress test of clearinghouses encompassed cleared futures and options and interest rate swaps and assumed the default of the same two systemically important clearing members at each clearinghouse. The commission analyzed the house accounts and customer accounts of these clearing members using actual positions and collateral as of Aug. 16.
The test results showed that the clearinghouses generated funds using cash received from maturing reverse-repurchase agreements, selling collateral, accessing cash balances at a commercial bank, accessing cash balances at a central bank, converting one currency to another, and entering into repurchase agreements. They used different combinations of these methods to generate funds.
Whenever the derivatives clearing organizations used the same methodology or the same firm to meet liquidity demands, commission staff concluded that the cumulative size of liquidity requirements would not limit the ability of each clearinghouse to meet its settlement obligations.