ESMA CCP Fire Drill 2025: What the Global Default Simulation Report Means for Firms

In November 2025, regulators and market participants across multiple jurisdictions completed a coordinated simulation of a major clearing member failure. ESMA has now published the outcomes report, and the findings carry direct implications for clearing members, compliance officers, and auditors who need to demonstrate operational readiness under stress.

What the CCP CIDS Exercise Was

The CCP Global International Default Simulation, known as CIDS, brought together 38 central counterparties from around the world alongside their clearing members. The scenario centred on the hypothetical failure of a common participant, testing whether CCPs and members could coordinate their default management processes across different legal systems and time zones simultaneously.

Who Sat on the Lead Authorities Group

ESMA joined the lead authorities group alongside the Deutsche Bundesbank, BaFin, the US Commodity Futures Trading Commission, and the Bank of England. That combination reflects the genuinely cross-border nature of CCP default risk: a clearing member failure does not respect jurisdictional boundaries, so the oversight structure has to span them too.

The group shaped the exercise design, monitored how it ran, and then surveyed participants to capture lessons learned. Those lessons feed directly into how the next iteration is constructed. This is not a box-ticking exercise; the lead authorities treat it as an evolving programme, not a one-off event. The 2025 report builds on an earlier report ESMA published following the 2023 exercise.

Key Findings and Recommendations

The report identifies specific areas where the lead authorities expect progress before the next exercise. Two stand out as particularly operational in nature.

Reducing Fragmentation in Procedures and Communications

Regulators want the industry to make measurable progress on cutting fragmentation in default management procedures and the communication conventions CCPs use with members. Inconsistent processes slow response times when speed matters most. The authorities specifically flag greater use of portal-based solutions as a way to standardise information flows during a live default event.

A Voluntary Market Stress Overlay Module

The second recommendation is more novel. Lead authorities are considering a voluntary module that layers a coherent, cross-CCP macro stress scenario on top of the standard default simulation. The aim is to test operational capacity and infrastructure constraints not just under the assumption of a member failure in calm markets, but under conditions that are stressed yet plausible. That distinction matters: real defaults rarely happen when volatility is low.

For compliance teams and auditors, the stress overlay concept is worth watching. If it becomes a fixture of future exercises, CCPs will need to demonstrate that their systems, governance frameworks, and communication protocols hold together when market conditions are simultaneously adverse. Clearing members will face parallel pressure to evidence their own readiness. Read more on EMIR 3 active account requirement and its reporting obligations, which intersects with CCP operational demands for EU-based firms.

Why This Matters Beyond the Exercise Itself

Fire drills of this scale serve a purpose that goes beyond the day of the simulation. They surface gaps in operational documentation, reveal where communication breaks down under time pressure, and test whether governance arrangements that look solid on paper actually function when multiple institutions are moving simultaneously.

For accounting firms and auditors servicing clearing members or CCPs, the published report is a reference point. Clients may face questions from regulators about how their default management procedures align with the lessons the lead authorities have drawn. Firms advising on regulatory capital, margin frameworks, or operational risk governance should be familiar with the report's recommendations. The cross-jurisdictional composition of the lead authorities group also signals that findings will inform supervisory expectations in the EU, the US, and the UK concurrently.

The SEC-CFTC portfolio margin harmonisation consultation is another area where US and EU regulatory expectations are converging, making cross-border coordination a recurring theme for compliance teams to track.

Frequently Asked Questions

What is the CCP CIDS exercise?

CIDS stands for CCP Global International Default Simulation. It is a coordinated industry exercise in which CCPs and their clearing members simulate the failure of a common participant to test and improve default management readiness across jurisdictions.

Which regulators were involved in the 2025 exercise?

The lead authorities group included ESMA, the Deutsche Bundesbank, BaFin, the US Commodity Futures Trading Commission, and the Bank of England. They jointly designed the exercise, monitored its execution, and produced the outcomes report.

How many CCPs participated in the 2025 simulation?

38 CCPs from across the world took part, alongside their clearing members and clients.

What did the lead authorities recommend for future exercises?

Two main areas: first, industry-led reductions in procedural and communication fragmentation across CCPs, with greater use of portal-based solutions; second, a voluntary macro stress overlay module to test operational capacity under simultaneously stressed market conditions.

What does this mean for clearing members and their advisers?

Clearing members should review how their default management documentation and communication protocols compare with the practices the lead authorities have identified as needing improvement. Advisers and auditors should treat the report's recommendations as an indicator of where supervisory scrutiny may focus in future examinations.

Source: ESMA