Oslo Clearing ASA Self Assessment ESCB-CESR Recommendation

The derivatives segment is in majority based on the full segregation of end client
positions and collateral, with an unambiguous right for Oslo Clearing to port out these
end clients, should their clearing member enter into default. This reduces the
potential loss impact for Oslo Clearing. Presently Oslo Clearing relies solely on its own
funds to absorb losses in the derivatives segment.
The regular stress testing performed by Oslo Clearing shows that the own funds of
Oslo Clearing are more than sufficient to withstand the default of the largest exposure
under extreme, but plausible market conditions.
Has the CCP developed scenarios of extreme but plausible market conditions for this
purpose and conducted stress tests accordingly?
The stress test methodology of Oslo Clearing is based on classifying all underlying
equity market instruments, indexes and interest rate instruments in nine (9) different
market segments, and altering prices in three (3) directions (up, down and
unchanged) according to specific rules for how market segments interact. The result
is 369 different, but plausible, market scenarios.
The same scenarios are applied to both equity and derivatives markets as well as
collateral in form of equity market instruments, interest rate instruments, and cash
denominated in foreign currency.
What scenarios are evaluated? Do the scenarios include the most volatile periods that
have been experienced by the markets for which the CCP provides services?
The 369 scenarios do not include inconsistent combinations of price movements per
segment. Price movements per segment are derived from the current margin rates
per underlying market instrument, and scaled with a factor in order to test outcomes
with at least 4 standard deviations. Oslo Clearing has defined a floor of 16 pct. to be
the minimum price change under stressed market conditions. The stress test
methodology, although scenario based, has thus been designed so as to include the
most volatile periods that have been experienced.
The dynamics of the stress test methodology implies that the regular factor
adjustments on the margin rates affect the levels for stress testing. In addition, Oslo
Clearing has introduced minimum stress test levels in order to permanently reflect
the price movements observed for the most volatile periods in the markets cleared.
Does the CCP at least have sufficient resources to in the event of default by the
participant with the largest exposure? Has the potential for multiple simultaneous
defaults been evaluated?
Oslo Clearing measures the stress test as the value, given the default of one
member, and its largest end client (only applicable for the derivatives segment),
calculated across all members and all scenarios.
For internal purposes, multiple simultaneous defaults are also considered. The largest
two exposures are calculated and reported on a daily basis.
Are stress tests performed at least monthly, with a comprehensive reconsideration of
models, parameters and scenarios occurring at least annually?
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