Default Fund

The CCP has a pre-funded fund known as the Default Fund, which has been separated by segment. Thus, if a Clearing Member does not hold positions or trade in a segment, it will never be affected by the default of a Clearing Member with losses in that segment.

Clearing Members and Agent Members of Direct Clearing Clients must make contributions to the Default Fund.

Default Fund contributions shall be posted in cash Euro only, deposited by the Clearing Member, or by its Payment Agent in BME CLEARING account in the payments module of the TARGET2 platform system.

The purpose of the Default Fund is to cover any debit balances which may result from managing the Default of a Clearing Member, and which are not covered by the amounts corresponding to the sum of Initial Margins, Individual and Extraordinary Margins and the contribution to the Default Fund of the Defaulting Member, in addition to BME CLEARING's own dedicated funds.

The Circular “Default Fund” shall establish the minimum amount of the total contribution to the Default Fund for each Segment, consisting of the sum of the different minimum contributions for each Clearing Member, depending on their Segment.

The Circular corresponding to each Segment may establish criteria to require contributions additional to the minimum contribution, based on the relative risk of each Clearing Member within the Segment in question.

Criteria on the minimum size of this fund, how Members’ contributions and minimum contributions to the fund are calculated, drawdowns on the fund and the replenishing of contributions and refunding thereof in the event a Member ceases its Membership are set forth in the “Default Fund” Circular for each of the CCP’s segments pursuant to the provisions laid down in BME CLEARING’s Rule Book.

The criteria to calculate the contributions of each Clearing Member, described in each “Default Fund” Circular, are based on proportionality. Contributions shall be proportional to each Clearing Member’s share of its average exposure compared to the total average exposure for all the CCP's Clearing Members.

In the event that the Default Fund should need to be used, the amount withdrawn shall be allocated proportionally to the Clearing Members, depending on the contribution they have made for each of their Segments in the most recent recalculation or replenishment.

The above shall be done without prejudice to the rules preferentially applied, which are the ones set down in the Rule Book or the General Conditions for a specific Segment.

Clearing Members shall be obliged to restore their contributions and to provide the additional contributions to the Default Fund, following the procedures, within the periods and within the limits stipulated, where appropriate, by Circular.

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