(a) Backtest means the ex post comparison of realized outcomes with margin model forecasts
to analyze and monitor model performance and overall margin coverage.
(b) Central counterparty means an entity
that interposes itself between counterparties to contracts traded
in one or more financial markets, becoming the buyer to every seller
and the seller to every buyer.
(c) Central
securities depository means an entity that provides securities
accounts and central safekeeping services.
(d) Critical operations and critical services refer to any
operations or services that the designated financial market utility
identifies under section 234.3(a)(3)(iii)(A).
(e) Designated financial market utility means a financial
market utility that is currently designated by the Financial Stability
Oversight Council under section 804 of the Dodd-Frank Act (12 U.S.C.
5463).
(f) Financial market utility has
the same meaning as the term is defined in section 803(6) of the Dodd-Frank
Act (12 U.S.C. 5462(6)).
(g) Link means,
for purposes of section 234.3(a)(20), a set of contractual and operational
arrangements between two or more central counterparties, central securities
depositories, or securities settlement systems, or between one or
more of these financial market utilities and one or more trade repositories,
that connect them directly or indirectly, such as for the purposes
of participating in settlement, cross margining, or expanding their
services to additional instruments and participants.
(h) Operational risk means the risk that deficiencies in information
systems or internal processes, human errors, management failures,
or disruptions from external events will result in the reduction,
deterioration, or breakdown of services provided by the designated
financial market utility.
(i) Orderly wind-down means the actions of a designated financial market utility to effect
the permanent cessation, sale, or transfer of one or more of its critical
operations or services in a manner that would not increase the risk
of significant liquidity or credit problems spreading among financial
institutions or markets and thereby threaten the stability of the
U.S. financial system.
(j) Recovery means,
for purposes of section 234.3(a)(3) and (15), the actions of a designated
financial market utility, consistent with its rules, procedures, and
other ex ante contractual arrangements, to address any uncovered
loss, liquidity shortfall, or capital inadequacy, whether arising
from participant default or other causes (such as business, operational,
or other structural weaknesses), including actions to replenish any
depleted prefunded financial resources and liquidity arrangements,
as necessary to maintain the designated financial market utility’s
viability as a going concern and to continue its provision of critical
services.
(k) Securities settlement system means an entity that enables securities to be transferred and settled
by book entry and allows transfers of securities free of or against
payment.
(l) Stress test means the
estimation of credit or liquidity exposures that would result from
the realization of potential stress scenarios, such as extreme price
changes, multiple defaults, and changes in other valuation inputs
and assumptions.
(m) Supervisory Agency has the same meaning as the term is defined in section 803(8) of
the Dodd-Frank Act (12 U.S.C. 5462(8)).
(n) Third party means any entity, other than a participant of a designated
financial market utility acting in that capacity, with which a designated
financial market utility maintains a business arrangement, by contract
or otherwise.
(o) Trade repository means an entity that maintains a centralized electronic record of
transaction data, such as a swap data repository or a security-based
swap data repository.
