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Concetration Limits

CONCENTRATION LIMITS 

  • A concentration limit applies to outstanding balance in circulation:

    It is applied for fixed-income securities only. As already mentioned in response to paragraph 1 of Article 46, the collateral provided by a Clearing Member in a single issue to meet its margins requirement may not exceed 10% of the outstanding balance in circulation. In addition, the collateral provided by all Members in a single issue may not exceed 25% of the outstanding balance in circulation.
     
  • A concentration limit applies to daily average trading volume:
    The total exposure by a Clearing Member may not exceed a number of times[1] the daily average volume. This limit is explained in detail in the response to Article 42 (1) of the Delegated Regulation.

Fixed-income securities

We set the following limits for every issuer:

Collateral acceptance limit:

  • The collateral provided by a Clearing Member in a single issue may not exceed 10% of the outstanding balance in circulation.
  • The collateral provided by all Members in a single issue may not exceed 25% of the outstanding balance in circulation.

Residual maturity term limit:

The exposure of a Clearing Member in a single issue to meet the margin requirements must not exceed:

  • 10 times daily average trading volume for assets maturing within 11 years. 
  • 6 times daily average trading volume for assets maturing after 11 years.

 Therefore:

The Average Daily Volume will be considered according to what is set up in the Average Daily Volume General Circular.

The exposure of a Clearing Member for a given residual maturity term will be understood as the nominal volume, multiplied by the price, based in the sum of:

  • Securities posted as margins.
  • The long net position in securities within the same residual maturity term, for those contracts belonging to the BME CLEARING Fixed Income Securities Contract Group.
  • Securities posted in BME CLEARING’s Account in IBERCLEAR, CLEARSTREAM or EUROCLEAR received as a result of the posted cash margins invested in a repo with the Clearing Member as counterparty and according to the Investment of cash margins paragraph of the corresponding Posting of Margins Circulars.

Equities

The number of shares offered as Margin Collateral by a Client or by a Member (or by a third party guarantor offering securities as Margin Collateral for the formers’ obligations) shall be limited depending on the Average Daily Volume , as stated in the Average Daily Volume General Circular. This limit is also applied at a Clearing Member level.



[1] See exposure definition later on, with reference to Article 42 of Delegated Regulation (EU) 153/2013 on Concentration Limits.

 

 

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