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Investment policy

CASH MARGIN INVESTMENT POLICY

 BME CLEARING's investment strategy is highly conservative, prioritizing the security of the investment over the return on cash invested. 

The funds are deposited in cash in the CCP’s cash accounts in TARGET2-Banco de España-one account for CCP’s own resources (NRBE 9094), the other for third-party collateral or funds (NRBE 9095) – or invested in financial instruments with low credit and market risks. 

BME CLEARING's cash and securities accounts in which it holds its own resources are clearly identifiable separately from the accounts in which Members' cash and securities collateral are held. 

The decision not to invest and leave the cash in the CCP's third-party account with the Eurosystem rests with Clearing Members. 

The CCP has no funds (own or third-party) posted in commercial banks. 

Most of the CCP’s financial resources, which consist of collateral required of members and posted by them in cash in the BME CLEARING account with TARGET2- Banco de España, may be invested in buy sell back transactions:

  • The collateral accepted as margin for the investment should be Sovereign Debt in euro currency type accepted as margin by BME CLEARING.
  • The counterparties of the buy/sell back transactions should be at least four high solvency Banks, with a solvency level between S1 and S6, according to the circular Calculation of shareholders' equity and solvency.
  • At 1 day, normally overnight. As the investments are for 1 day, the market risk of a sharp, adverse movement in the value of the collateral exchanged for an investment is largely mitigated. Market risk is also mitigated by applying haircuts to the investments based on the type of government debt and its residual maturity segment. Moreover, the investments may be liquidated quickly, if required.
  • BME CLEARING ensures that investments are diversified among several counterparties and that the percentage of the amount of margin invested relative to the own resources of each counterparty is limited to 10%. 

BME CLEARING never invests in equities, and therefore does not invest in its own securities, consisting of shares in its parent company, Bolsas y Mercados Españoles (BME).

 

 

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