World Federation of Exchanges cautions Bank of England that proposed UK CCP reforms could diverge from international standards and harm competitiveness

The World Federation of Exchanges (WFE) published a consultation response warning the Bank of England that elements of its proposed reforms for UK central counterparties (CCPs) could create UK-only requirements that add operational and economic burdens without commensurate supervisory benefits. The WFE’s key concerns cover three areas. First, it opposes a proposed requirement for UK CCPs to disclose detailed margin model information sufficient for market participants to replicate models, arguing this goes beyond international standards and would expose proprietary methodologies, weaken incentives to innovate, and reduce the UK’s attractiveness as a clearing hub. Second, it warns the proposed porting incentive framework could have unintended consequences for end-users, particularly those using net omnibus accounts that would require many clients to agree ex-ante on a single backup clearing member; it recommends an ex-ante opt-out for clients unlikely to port, enhanced support for porting through portfolio data sharing with alternative clearing members, and allowing CCPs to accept collateral directly during the porting period, while opposing any link between default fund requirements and perceived client portability. Third, it questions the need for an additional prefunded “second skin-in-the-game” tranche set at 25% of risk-weighted capital, and objects to linking this to default fund size and to a one-month replenishment requirement, calling instead for more risk-sensitive and internationally aligned calibration.