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 lowest S9 level , 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. In the case of both the OTC Interest Rate Derivatives Segment and the xRolling FX contracts belonging to the Financial Derivatives segment, the additional margin due to having a credit rating below investment grade will be added up to the Initial Margin.
- In any exceptional situation, because of the general state of the market or because of a Member's specific circumstances, and which in BME CLEARING's opinion constitutes a high risk that is not adequately covered by the Individual Funds and the Initial Margin.