Collateral
Management

Liquidity risk control

At a CCP level, BME CLEARING will also assess that, as a minimum 30% of the total amount of margins required by BME CLEARING, in respect of all concepts and in all Segments, has been posted in cash, in Euros. 

If this amount falls below 30%, Clearing Members whose cash collateral is not at least 30% in cash (Euro) in respect to their margins required by BME CLEARING, for all concepts and in all Segments, will be given five business days to recalibrate their collateral to attain this threshold. 

On a daily basis BME CLEARING quantifies, both intra-day and at the end-of-day, the status of its liquid resources and consequently, its potential liquidity needs under various scenarios which include: 

Normal Market circumstances

BME CLEARING estimates the liquidity needs for the upcoming Multilateral Target2 – Settlement. For every Clearing Member the “liquidity need” for the next multilateral settlement. 

BME CLEARING shall assess the impact of the default of the two Clearing Members with the highest liquidity needs according to the previous formula. The resulting liquidity needs after the two largest Clearing Members have been aggregated will be compared to BME CLEARING’s liquid available resources. 

If the CCP’s liquid available resources do not cover the aggregated liquidity needs of the two largest Clearing Members, an apportionment among the affected Members would be performed in order to see which part of the liquidity shortfall corresponds to each of them. Members in such situation having equities posted as collateral with the CCP must replace them by cash in Euro, no later than five business days, until the liquidity shortfall is over. 

Stress Test Situation

At the end of each trading session, BME CLEARING calculates the potential liquidity needs arising from the default of the two Clearing Members to which the CCP has the greatest exposure under Stress Test conditions, according to Article 44.1 of Regulation (EU) 648/2012. 

The two Clearing Members with the highest potential liquidity needs under stress test circumstances are selected. The aggregated amount of the two largest Clearing Members’ potential liquidity needs shall be compared to BME CLEARING’s available liquid resources, which are exactly the same than those calculated under normal circumstances as per section a) above. 

If BME CLEARING’s liquid available resources do not cover the aggregated potential liquidity needs of the two largest Clearing Members under stress test conditions, an apportionment among the affected Members would be performed by BME CLEARING in order to see which part of the liquidity shortfall corresponds to each of them. 

If some of these Members with potential liquidity needs unresolved have also equities posted as collateral with the CCP, they must replace them by cash (in Euro) or sovereign debt, until the liquidity shortfall is over and within the next five business days at the most.

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