OTC Clear has implemented a comprehensive risk management framework which is designed to ensure the financial performance of all cleared Contracts by adequately controlling credit, market and liquidity risks. OTC Clear also has appropriate policies, procedures and controls in place to manage the additional risks that the service is exposed to including operational, legal, custody, investment, general business and settlement risks.
The Securities and Futures Commission of Hong Kong (SFC) requires recognised clearing houses (RCH) to observe and apply the Principles for Financial Market Infrastructures (PFMI) published by the Committee on Payments and Market Infrastructures (CPMI) and the International Organisation of Securities Commissions (IOSCO) in April 2012. The SFC’s recognition of OTC Clear as an RCH was on the basis of its assessment of OTC Clear’s compliance with the PFMI.
OTC Clear’s approach to observing each applicable principle in the PFMI is summarised in this disclosure document, in accordance with the guidelines set forth in the ‘Disclosure framework and Assessment methodology’ published by CPMI-IOSCO in December 2012.