Collateral
Management

Cash Settlement Concepts

BME CLEARING shall carry out the settlement of fees, variation margin, settlements derived from default management measures, and any other settlements established in the corresponding General Conditions or by Circular. 

For the delivery of cash amounts resulting from Settlements, Clearing Members must have an account in the Target2 system. 

Alternatively, the Clearing Member may designate the entity which, holding an account in the established payment system, will act as its Payment Agent for payments of cash amounts resulting from the related Settlements. Such designation shall be subject to approval by BME CLEARING. 

The Payment Agent acts in the name and on behalf of the Clearing Member. However, the Payment Agent’s activities do not change the responsibility of the Clearing Member towards the CCP in any way. The Clearing Member retains full responsibility with regards to their payment obligations to BME CLEARING. 

The following concepts shall be settled daily in cash through a debit or credit on the Payment Agent’s account in Target2 platform. Cash settlement will take place on T+1, being T the transactions’ date, including expirations and exercises of futures and options. 

It will be done via a standard Multilateral Settlement mechanism on the TARGET2 platform, where the credits and debits of each Clearing Member are offset:

Daily Settlement of Gains and Losses

During the life of a futures contract, and up to the last day it is registered, a daily variation margin takes place, based on the difference between the settlement price and the last settlement price (for day trades: the price of the trade, for the rest: the settlement price of the previous session). On the last day of registration, the variation margin calculation is based on the difference between the final settlement price and the last settlement price.

Premiums

Daily procedure whereby buyers of Options pay the Premiums to BME CLEARING and the sellers receive such Premiums from BME CLEARING.

Fees

Trading and clearing Fees are settled on a daily basis.

The rest of fees are also cash settled through Target2 system but with a different periodicity, may it be monthly or quarterly.

Variation Margin

The formula used to calculate the Initial Margin variation to be posted in cash with BME CLEARING on the following Business Day, is as follows:  

Initial Margin variation to be posted in cash on D+1 = Total Initial Margin to be posted on D+1 - Margins posted in Securities - Margins posted in Cash on D.  

The Initial Margin variation to be posted in Cash by the Clearing Member shall be the sum of the variation in respect of its own Accounts and that of its Non-Clearing Members, plus any adjustment to Individual funds and/or Extraordinary margins, where applicable, so as to obtain the cash Margins to be posted on D+1 by the Clearing Member. 

Interests of the Investment of Cash Margins

When the Clearing Member has not requested BME CLEARING to not invest the Cash Margins (and therefore keep them in BME CLEARING’s account in the Eurosystem), BME CLEARING may invest cash margins by means of overnight buy/sell back transactions. 

In the case of a negative interest environment, BME CLEARING chose from the following two alternatives, the least harmful for Members at all times:

  1. Perform the investment in a buy/sell back transaction to a negative interest rate.
  2. Maintain the cash in its account in the TARGET2 in the Eurosystem, with the cost of negative interest rate applied by the ECB.

BME CLEARING will charge or credit any negative or positive interest generated by each alternative to the Clearing Member or its Payment Agent, along with the associated costs of the alternatives, if any.

BME CLEARING shall not make any withholding from its Members when crediting the amount of interests, due to its Members' financial intermediaries condition.

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