The operator shall have appropriate rules and procedures for managing the default of a participant and for minimising credit and liquidity risks for the financial market infrastructure and its participants. These rules and procedures shall enable the operator to meet its obligations when due.
In particular, the rules and procedures shall define:
the sequence in which the operator uses collateral and other financial resources to cover losses (default waterfall);
how the operator allocates losses that are not covered by collateral and other financial resources;
how the operator deals with liquidity shortfalls;
how the operator replenishes collateral and other financial resources that were deployed to cover losses or to bridge liquidity shortfalls following the default of a participant.
The operator shall review and test these rules and procedures at least annually.
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