Financial Markets Act, 2012 (Act No. 19 of 2012)RegulationsFinancial Markets Act RegulationsChapter VI : Central Counterparties40.10 Frequency |
| (1) | A central counterparty must analyse and monitor— |
| (a) | its model performance and financial resources coverage in the event of defaults by— |
| (i) | back testing margin coverage at least daily; and |
| (ii) | conducting at least daily stress testing using standard and predetermined parameters and assumptions; |
| (b) | its liquidity risk management framework by conducting monthly stress tests of its liquid financial resources. |
| (2) | A central counterparty must— |
| (a) | conduct a detailed thorough analysis of testing results at least on a monthly basis in order to ensure its stress testing scenarios, models and liquidity risk management framework, underlying parameters and assumptions are correct; |
| (b) | ensure that the analysis referred to in paragraph (a) is conducted more frequently in stressed market conditions, including when the securities cleared or markets served in general display high volatility, become less liquid, or when the size or concentrations of positions held by its clearing members increase significantly or when it is anticipated that a central counterparty will encounter stressed market conditions; |
| (c) | ensure that a sensitivity analysis be conducted at least monthly, using the results of sensitivity tests; |
| (d) | ensure that the sensitivity analysis referred to in paragraph (c) be conducted more frequently when markets are unusually volatile or less liquid or when the size or concentrations of positions held by its clearing members increase significantly; |
| (e) | test offsets among securities and how correlations perform during periods of actual and hypothetical severe market conditions at least annually; |
| (f) | test its haircuts at least monthly; |
| (g) | reverse stress tests at least quarterly; |
| (h) | test and review its default procedures at least quarterly and perform simulation exercises at least annually, in accordance with Regulation 40.9; |
| (i) | perform simulation exercises following any material change to its default procedures. |