Collateral
Management

Investment Policy

The Collateral provided in cash shall be invested by BME CLEARING, unless the Member or Client communicates its wish not to be invested, in which case, non-investment decision, it shall be deposited in the account of BME CLEARING in the Eurosystem under the terms established in the Instruction Margins posted as cash in BME CLEARING account with the Eurosystem.

In cases where BME CLEARING does not have access to deposits in central bank accounts, therefore it applies the restriction imposed by Delegated Regulation 153/2013 (EMIR) of not holding more than 95% of uncollateralised deposits, the collateral provided in cash will always be subject to investment, and the Member or Client may not, in these cases, request the non-investment of their collateral.

BME CLEARING may invest the collateral posted in cash by means of re-purchase transactions known as buy/sell-backs, classic repos (reverse), or by direct purchase, either through bilateral transactions or through BME CLEARING's participation in investment platforms, under the following conditions:

  • The collateral accepted as margin for the investment should be Sovereign Debt eligible as collateral in BME CLEARING.
  • The counterparties of the investment should have at least, solvency level between S1 and S7, according to the Circular Calculation of shareholders' equity and solvency.
  • BME CLEARING will establish credit limits in accordance with the SIX Group's investment policy according to the Solvency Ratio assigned to the counterparties and issuers. In the case of direct purchase transactions, the following concentration limits will also be considered:
    • The exposure of the investment to one issuer may not exceed 25% of the total invested by BME CLEARING.
    • The investment exposure may not exceed 10% of the outstanding balance of an issue.
  • In general, in the case of bilateral buy/sell-back or classic repo (reverse) transactions, BME CLEARING will apply the valuation haircuts set out in the General Circular Valuation of securities posted as collateral to the assets deposited in BME CLEARING's securities account in IBERCLEAR, CLEARSTREAM, EUROCLEAR or SIX SIS, received as a result of having invested part of the collateral posted in cash in a buy/sell-back or classic repo with the Clearing Member and/or counterparty.  For those buy/sell-back or classic repo transactions with a repurchase term longer than one day, a monitoring of the price evolution and collateral adjustment will be carried out in case of consumption of the applied valuation haircut.

When buy/sell-backs or repo transactions are subject to collateral management through triparty mechanisms that automatically value and adjust the collateral value of the transaction, or in the case of outright purchase transactions, BME CLEARING will not apply valuation haircuts.

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