The purpose of the Extraordinary Margin is to cover BME CLEARING’s risk in relation to the Clearing Members in extraordinary situations.
BME CLEARING may require Extraordinary Margins for each Segment, either individually from a Clearing Member, or generally from all Clearing Members, and also to Direct Clearing Clients, in cases which BME CLEARING considers to be high risk.
BME CLEARING has a Circular called “Cases for Posting of Extraordinary Margins” detailing all cases in which the CCP may request this kind of margin to Clearing Members. These cases can be summarized in:
- if the Extraordinary Margin Fluctuation Parameter has been exceeded (margin call), which is a parameter of maximum level of price variation or the change in basis points between the Zero Rate real-time curve and the curve of the last Zero Rate Margin Call consumption (in Swaps), with the purpose of allowing BME CLEARING to regain a sufficient level of funds in situations of exceptional volatility. This parameter is established in the Circular “Margin Calculation Parameters” of each Segment.
- if the solvency of any Member, is in the low levels (S8-S9), the Member concerned must immediately post the extraordinary margin that it would be required to deposit in the event of a price fluctuation above the Extraordinary Margin Fluctuation parameters less the minimum Solvency Limit that applies to its new rating.
- in general, when the general state of the market or a Member's particular circumstances involve, in BME CLEARING's judgement, a high risk that is not sufficiently covered by the Individual Fund or the Initial Margin.