Recital 3

(3)The primary rules applicable to CCPs qualified as covered clearing agencies are laid down in Sections 3(a)(23) and 17A of the Securities Exchange Act of 1934 (‘the Exchange Act’), Titles VII and VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (‘the Dodd-Frank Act’) and in regulations adopted by the SEC thereunder, and in particular Rule 17Ad-22 (‘primary rules’). Those primary rules, however, do not provide for a minimum liquidation period for the calculation and collection of initial margins. For TBAs, margins are calculated on the basis of a three-day liquidation period. That three-day liquidation period takes into account the high liquidity of the TBA market, which is the second largest fixed income market in the USA, and is based on a margining model elaborated to ensure that margins cover potential exposures that the CCP estimates may occur until the hedging or liquidation of positions of a defaulting participant. The margin model uses a lookback period taking into account the last 10 years and, where relevant, stressed market periods beyond those 10 years so to ensure that periods of market stress are always taken into account. The rules and procedures for the calculation of margins for TBAs follow an approach that is similar to the rules laid down in Title IV of Regulation (EU) No 648/2012. Based on an assessment of the outcome of those rules and procedures and their adequacy to mitigate the risks that clearing members and trading venues established in the Union may be exposed to, those rules and procedures can be considered equivalent to the requirements laid down in Title IV of Regulation (EU) No 648/2012, as elaborated in Article 26(1) of Commission Delegated Regulation (EU) No 153/2013 ⁴ . That provision requires a CCP to consider minimum liquidation period of 2 days for non-OTC derivative contracts, and a minimum liquidation period of 5 days for OTC derivative contracts, typically with margin collected on a net basis.