A central counterparty must—
| (a) | establish and maintain procedures to recognise changes in market conditions, including increases in volatility or reductions in the liquidity of the securities it clears, so as to promptly adapt calculation of its margin requirement to appropriately account for new market conditions; |
| (b) | conduct tests on its haircuts in order to ensure that collateral can be liquidated at least at its hair-cut value in observed and extreme but plausible market conditions; |
| (c) | if it collects margin at a portfolio, as opposed to product level, continuously review and test offsets among products; |
| (d) | base the offsets referred to in paragraph (c) on prudent and economically meaningful methodology that reflects the degree of price dependence between the products; and |
| (e) | in particular test how correlations perform during periods of actual and hypothetical severe market conditions. |
