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Clearing Participant Monitoring

  • As JSCC assumes obligations as a Clearing Organization and is exposed to credit risk of each trade counterparty, it needs to manage credit risk of the Participant. For such purpose, JSCC sets out the requirements to qualify as Clearing Participant (acquisition criteria and maintenance criteria), and any person who intends to become a Clearing Participant must apply for an acquisition of the Clearing Qualification to JSCC and obtain its approval.

    Clearing Participants

  • In order to check creditworthiness of counterparties, or Clearing Participants, JSCC continuously monitors Clearing Participants for ongoing compliance with the participation criteria for each of JSCC’s Clearing Businesses; the soundness of Clearing Participant finances, of their management, and of their business structure.
  • First, as for the soundness of Clearing Participant finances, JSCC receives reports on Clearing Participant finances monthly, quarterly, semi-annually, and annually to monitor the soundness of Clearing Participant finances. The reports Clearing Participants submit to JSCC are the same as those submitted to regulators. Additionally, JSCC monitors daily news for information on Clearing Participant finances, as well as credit ratings, market information (stock prices, CDS/bond spreads).
  • Second, as for the soundness of Clearing Participant management, JSCC requires Clearing Participants to submit a report when there is a change in executive officer or major shareholder. JSCC also monitors daily news for information on Clearing Participant management.
  • Third, as for the soundness of Clearing Participant business structure, JSCC monitors daily news for information on Clearing Participant business structure, such as office transfers or reductions in operations. JSCC also conducts monitoring of daily clearing operations, including payments, securities deliveries, and whether collateral is deposited on time.
  • When JSCC determines that a Clearing Participant does not satisfy participation criteria or has violated JSCC rules, JSCC will take disciplinary measures against the Clearing Participant according to the methods prescribed in the Business Rules of each Clearing Business.
  • These measures include issuing instructions on business structure or position improvement, the suspension of all or part of its clearing services and revocation of Clearing Qualification for the relevant Clearing Participant. Prior to these measures, JSCC may request the submission of materials or conduct an on-site examination to gain a better understanding of the Clearing Participant’s finances, management, and business structure, if JSCC deems such a request necessary to ensure the stable operations of the Clearing Business.
  • In order to promote improvement at the Clearing Participant, JSCC may recommend appropriate measures based on its rules.

Clearing Participant Monitoring

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