Financial Markets Act, 2012 (Act No. 19 of 2012)RegulationsFinancial Markets Act RegulationsChapter VI : Central Counterparties13. Risk management framework13.4 Risk mitigation |
| (1) | The risk management framework must, in the case of risk mitigation, include matters related to collateral and margin agreements with counterparties and be sufficiently robust to ensure that the central counterparty continuously— |
| (a) | devotes sufficient resources to the orderly operation of margin agreements with OTC derivative and securities financing counterparties, as measured by, among other things, the timeliness and accuracy of the central counterparty’s outgoing calls; and |
| (b) | controls, monitors and reports— |
| (i) | all relevant risk exposures related to margin agreements, such as the volatility and liquidity of the securities exchanged as collateral; |
| (ii) | any potential concentration risk to particular counterparties or types of collateral; |
| (iii) | the reuse of collateral , including the potential liquidity shortfalls resulting from the reuse of collateral received from counterparties; and |
| (iv) | all relevant matters related to the surrendering of rights on collateral posted to counterparties. |
| (2) | The risk management framework must be sufficiently robust to timeously identify material concentrations in any one of the risk exposures identified as contemplated in Regulation 13.1(2), including concentrations relating to or arising from— |
| (a) | an individual or single counterparty or person; |
| (b) | a group of related or connected counterparties or persons; |
| (c) | credit exposures in respect of counterparties or persons in the same industry, economic sector or geographic region; |
| (d) | credit exposures to counterparties or persons, the financial performance of which is dependent on the same activity or indirect credit exposures arising from the central counterparty’s risk mitigation activities such as exposure to a single collateral type or a single credit protection provider; |
| (e) | interest-rate risk; |
| (f) | liquidity risk; |
| (g) | funding sources; |
| (h) | trading exposure or risk, including interest-rate risk and price risk; |
| (i) | equity positions; |
| (j) | off-balance-sheet exposures, including guarantees, liquidity lines or other commitments; |
| (k) | correlation between any of the aforesaid risks, counterparties, instruments, assets, liabilities or commitments. |