A central counterparty must—
| (a) | assess its margin coverage by performing an ex-post comparison of observed outcomes with expected outcomes derived from the use of margin models; |
| (b) | ensure that such back testing analysis be performed each day in order to evaluate whether there are any testing exceptions to margin coverage; |
| (c) | ensure that the margin coverage referred to in paragraph (a) be evaluated on current positions for securities, clearing members and take into account possible effects from portfolio margining and, where appropriate, interoperable central counterparties; |
| (d) | consider the appropriate historical time horizons for its back testing programme to ensure that the observation window used is sufficient enough to mitigate any detrimental effect on the statistical significance; |
| (e) | consider in its back testing programme, at least, clear statistical tests, and performance criteria to be defined by central counterparties for the assessment of back testing results; |
| (f) | periodically report its back testing results and analysis in a form that does not breach confidentiality to the risk committee in order to seek its advice in the review of its margin model; |
| (i) | the back testing results and analysis are made available to all clearing members and, where known to the central counterparty, clients; |
| (ii) | for all other clients back testing results and analysis are made available by the relevant clearing members on request; |
| (iii) | the information is available in aggregated form and does not breach confidentiality; and |
| (iv) | clearing members and clients only have access to detailed back testing results and analysis for their own portfolios; |
| (h) | define the procedures to detail the actions it could take given the results of back testing analysis. |
