Eurex Clearing successfully simulated the failure of a major clearing participant in a global fire drill in April, the clearinghouse has revealed.
The clearinghouse, in association with LCH Swapclear and CME, tested a client’s portfolio that included open positions in listed equity derivatives and pending cash equity settlements.
The drill, which was based on the Brexit market conditions of June 2016, also incorporated the defaulted member’s open interest rate swaps and its listed fixed income derivatives transactions.
During the exercise, the equity derivatives portfolio was sold completely by the third day and the swaps auctions were successfully finalised on the fourth and fifth days. Out of the 52 auction participants, 51 passed the test.
Thomas Laux, chief risk officer at Eurex Clearing, said: “This result shows the high level of commitment and proficiency which market participants have achieved after several years of regularly drilling the process as part of mandatory auction participation. All processes worked as expected in the assumed timeline.”
”This means that they are easily manageable by members, even under extreme circumstances.“
