Question to the HM Treasury:

To ask Her Majesty's Government whether they, or any regulators, have reviewed the adequacy of the capitalisation of securities and derivative clearing houses since the introduction of restrictions on dealings in GameStop and AMC Entertainment; and what assessment they have made of the robustness of resolution plans for clearing houses

GameStop and AMC Entertainment are companies that are listed in the US and therefore fall within the remit of the relevant US regulators.

More broadly, however, the UK has a robust oversight and resolution regime in place for UK clearing houses (“CCPs”). The Government is committed to ensuring the highest regulatory standards for CCP oversight and resolution and keeps the regulatory framework under regular review.

Any restriction in the trading of specific UK shares would not itself have a detrimental effect on a UK CCP’s resources, as it would only mean less transactions cleared through the CCP.

However, if a clearing firm was unable to meet existing obligations to a UK CCP, the CCPs require their members to provide pre-funded resources to mitigate against this risk. Firstly, UK CCPs require clients to post collateral to help cover their trades if they should default on their obligations. CCPs then also require their clients to contribute to a mutualised pool of resources, to be used in the event the collateral provided by a defaulter is insufficient. This pool should, at a minimum, cover the default of the CCP’s two largest clients simultaneously.

In the unlikely circumstances where these pre-funded resources provided by its clients are insufficient, UK CCPs are also required to maintain a recovery plan to ensure the continuity of its services.

The Bank of England, as the regulator responsible for supervising CCPs in the UK, has close oversight of the requirements on firms set out above and is responsible for making sure that CCPs’ recovery plans are robust and up to date.