MIR 4.7.23

Past version: effective from 21/10/2015 - 20/10/2015
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A Recognised Clearing House must have a robust framework for managing its liquidity risks. Such a framework must enable it to manage liquidity risks arising from its Members and other participants on its facilities, and any other involved parties, such as settlement banks, custodian banks, liquidity providers ("Members and other involved parties"). For that purpose, the framework must, at a minimum, include:

(a) rules and procedures that:
(i) enable the Recognised Clearing House to meet its payment obligations on time following any individual or combined default of its Members and other involved parties;
(ii) address unforeseen and potentially uncovered liquidity shortfalls to avoid unwinding, revoking, or delaying the settlement of its payment obligations arising under the same-day, intra-day or multiday settlement obligations, as applicable; and
(iii) indicate any liquidity resources the Recognised Clearing House may deploy, in the event of default by a Member or other involved parties, during a stress event to replenish the available liquid resources and the associated process, so that it can continue to operate in a safe and sound manner;
(b) effective operational and analytical tools to identify, measure and monitor its settlement and funding flows on an on-going and timely basis; and
(c) rigorous due diligence procedures relating to its liquidity providers to obtain a high degree of confidence that each provider (whether the provider is a Member or other participant using its facilities or an external party) has:
(i) sufficient information to assess, understand and manage its own liquidity risks; and
(ii) the capacity to perform as required under their commitment.