Risk Management

Providing Optimum Protection to Clearing Members and their Clients

The central counterparty infrastructure we provide aims to safeguard the interests of our customers and the integrity of the markets we serve. We implement robust risk management and financial surveillance techniques designed to achieve our objective of providing clients with the security associated with a strong central counterparty. The contractual basis of our role as a central counterparty is an integral part of our risk management.

The techniques are specifically designed to:

  • estimate potential market exposures as accurately as possible
  • reduce the accumulation of current losses
  • ensure that sufficient resources are available to cover future obligations
  • allow for swift and appropriate action to rectify any financial problems and protect the marketplaces cleared
  • protect clearing members and their customers in the event of a default by a participant in the clearing process.

Our risk management processes are benchmarked against both industry recommendations and best practice standards promulgated by international regulatory bodies.

Investment Policy

CMECE maintains a policy for investing the cash balances which are held due to the lodgement of cash from members to cover initial margin requirements or as Guarantee Fund contributions.

In order to invest the portfolio in line with CPSS-IOSCO and EMIR regulatory requirements, the cash will be invested only in the highest quality, secure and liquid investments, with counterparties of the highest credit quality.

The cash will be invested in such a way that the overall portfolio is balanced; to the extent possible and practical, portfolios should be composed of a variety of investment instruments and maturities with a range of counterparties. Wherever possible, FX risk will be minimised by investing new cash balances, as well as the proceeds from existing and maturing investments, in assets of the same currency.