Overview
The Clearing Agencies are required to conduct stress testing of their total prefunded financial resources, as well as their liquidity resources, once each day using standard predetermined parameters and assumptions in compliance with the SEC’s Standards for Covered Clearing Agencies (CCAS).
The Stress Testing team has primary responsibility for the Clearing Agencies’ stress testing program and provides key support to the Clearing Agencies’ liquidity risk program, as stress testing is a core component for managing credit and liquidity risk. The Clearing Agencies are required to maintain sufficient prefunded financial resources to cover their credit exposures to each participant fully with a high degree of confidence, including under a wide range of foreseeable stress scenarios in compliance with Rule 17Ad-22(e)(4) of the CCAS. The Clearing Agencies are also required to maintain sufficient liquid resources, to effect settlement of their payment obligations with a high degree of confidence under a wide range of foreseeable stress scenarios in compliance with Rule 17Ad-22(e)(7) of the CCAS.
Liquidity Risk Management (LRM) has primary responsibility for the Clearing Agencies’ liquidity risk management program and works closely with the Stress Testing team. Additionally, Liquidity Risk Management performs or supports efforts which assist in the compliance with other applicable provisions of Rule 17Ad-22(e)(7) of the CCAS, including, for example, due diligence and testing of liquidity providers, performing model validations, and the maintenance of qualifying liquid resources.
Results from the application of stress-scenarios and the other activities of the Stress Testing and Liquidity Risk Management programs are used for risk measurement, monitoring, management, and mitigation.
Learn more about these programs here: