CCP equivalence signifies a regulatory determination recognizing that a central counterparty (CCP) in one jurisdiction operates under a supervisory and regulatory framework comparable to that of another jurisdiction. This recognition permits regulated entities to transact with the foreign CCP under specific capital treatment rules.
Mechanism
Jurisdictional authorities assess a foreign CCP’s risk management, governance, and operational standards against their domestic regulatory requirements. This evaluation covers aspects such as default management, collateralization practices, and legal certainty of settlement. If standards are deemed equivalent, the foreign CCP can service domestic firms without imposing unduly stringent capital charges.
Methodology
The strategic intent of CCP equivalence is to mitigate systemic risk and reduce regulatory fragmentation across global financial markets. It fosters cross-border clearing, enhancing market access and liquidity while ensuring consistent risk oversight. Within crypto institutional trading, establishing such equivalence would be a critical step for regulated entities to utilize crypto-native clearing houses, aligning digital asset risk management with established financial stability protocols.
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