124 STAT. 1689 PUBLIC LAW 111–203—JULY 21, 2010 measure the credit exposures of the derivatives clearing organization to each member and partici- pant of the derivatives clearing organization; and ‘‘(II) monitor each exposure described in sub- clause (I) periodically during the business day of the derivatives clearing organization. ‘‘(iii) LIMITATION OF EXPOSURE TO POTENTIAL LOSSES FROM DEFAULTS.—Each derivatives clearing organization, through margin requirements and other risk control mechanisms, shall limit the exposure of the derivatives clearing organization to potential losses from defaults by members and participants of the derivatives clearing organization to ensure that— ‘‘(I) the operations of the derivatives clearing organization would not be disrupted; and ‘‘(II) nondefaulting members or participants would not be exposed to losses that nondefaulting members or participants cannot anticipate or con- trol. ‘‘(iv) MARGIN REQUIREMENTS.—The margin required from each member and participant of a deriva- tives clearing organization shall be sufficient to cover potential exposures in normal market conditions. ‘‘(v) REQUIREMENTS REGARDING MODELS AND PARAMETERS.—Each model and parameter used in set- ting margin requirements under clause (iv) shall be— ‘‘(I) risk-based; and ‘‘(II) reviewed on a regular basis. ‘‘(E) SETTLEMENT PROCEDURES.—Each derivatives clearing organization shall— ‘‘(i) complete money settlements on a timely basis (but not less frequently than once each business day); ‘‘(ii) employ money settlement arrangements to eliminate or strictly limit the exposure of the deriva- tives clearing organization to settlement bank risks (including credit and liquidity risks from the use of banks to effect money settlements); ‘‘(iii) ensure that money settlements are final when effected; ‘‘(iv) maintain an accurate record of the flow of funds associated with each money settlement; ‘‘(v) possess the ability to comply with each term and condition of any permitted netting or offset arrangement with any other clearing organization; ‘‘(vi) regarding physical settlements, establish rules that clearly state each obligation of the deriva- tives clearing organization with respect to physical deliveries; and ‘‘(vii) ensure that each risk arising from an obliga- tion described in clause (vi) is identified and managed. ‘‘(F) TREATMENT OF FUNDS.— ‘‘(i) REQUIRED STANDARDS AND PROCEDURES.—Each derivatives clearing organization shall establish stand- ards and procedures that are designed to protect and ensure the safety of member and participant funds and assets.
