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ISDA pushes clearing review criteria

Tuesday 15 February 2011 - by Will Henley

A leading global derivatives body has urged US regulators to consider five criteria before announcing any public consultations on the clearing of security-based swaps.

In a letter to the Securities and Exchange Commission, dated Monday, the International Swaps and Derivatives Association argues that reviews "should only commence" once key conditions have been met, such as ensuring that all market standardisation issues defining a product have been resolved.

ISDA also calls on the Commission to allow industry groups a minimum of 45 days to review proposed rules, suggesting that too little time is given over to allowing the swaps industry to consider their impact.

Under its five criteria, ISDA wants the SEC to first consider whether it has all the information it needs and whether pricing standards and margin calculations have been agreed by a clearing agency's risk committee.

It also wants the Commission to be sure that clearing agencies have a proven ability to clear a product through testing and that they have sufficient operational resources.


Executive vice chairman Robert Pickel writes: "This process would address the risk that much of the information in the submission on which the Commission bases its determination of whether a security-based swap is required to be cleared is provided by the clearing agency and the clearing agency has an economic interest in the particular security-based swap being subject to mandatory clearing."

At present, the public review period is a minimum of 30 days.


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