Moody's Investors Service has proposed a new global methodology for rating central counterparty clearing houses (CCPs) which it has published for comment. 

The proposed methodology considers CCPs' clearing member default-management capabilities and related structural protections, as well as CCPs' business and financial fundamentals and their operating environments. 

The request for comment also lays out the key quantitative metrics and qualitative factors Moody's considers when reaching a rating determination for CCPs.

"The CCPs play a central role in the risk management of financial markets, with the CCP industry showing a strong history of default avoidance. The industry provided evidence of its resilience during its greatest modern-day test: the default of Lehman Brothers in 2008. All clearing houses successfully managed Lehman's default without incurring financial stress," the release stated.

"Over the last two decades, however, the industry's landscape has been changing dramatically, with clearing volumes undergoing a ten-fold increase and the products that the CCPs deal with becoming increasingly complex.

"Increased channeling of financial market activity to the clearing house has made the role of the CCP critical to the health of the financial system."

Moody's proposition suggests a new Clearing Counterparty Rating (CCR), which will reflect the rating firm's opinion of a CCP's ability to meet its clearing and settlement obligations to its clearing members as well as the financial loss that would result if a CCP were unable to meet such obligations. 

The CCR will reflect a bottom-up analysis of each clearing service in a rated legal entity.

Moody's currently rates four CCPs from two family groups under the Global Securities Industry Methodology (May 2013), and expects to convert these ratings to CCRs, utilising the new CCP methodology upon its adoption. Moody's does not expect rating changes as part of this methodology transition.

Moody's is seeking market feedback on its proposed methodology by August 21 2015.