Margins

BME CLEARING Fixed Income monitors position and risk, previous to the register of each transaction.

When registering a new buy/sell back transaction or repo in a given ISIN,  Position Limit excess is not allowed. This Limit depends on the ISIN residual maturity tranche, on the net position previously registered in that tranche and on the Market Average Daily Volume per tranche.

At the same time, an Intra-Day Risk Limit (IRL) is assigned by BME CLEARING to each Clearing Member. If a Clearing Member exceeds such Limit due to the impact of a price fluctuation in the current position or caused by novating new trades, it shall provide an Individual Fund to the CCP.

BME CLEARING calculates the risk of each Account in real time. In addition, at the end of the session, the CCP calculates the risk of the outstanding position pending to be settled at the end of day for each Clearing Member. Margins to cover such risk are required to be posted next morning.

BME CLEARING will demand to their Clearing Members the margins as below:

Initial Margin

Daily calculation for each outstanding position, for each account in the CCP Central Register, for each ISIN and Clearing Account (Proprietary Account and Individual Client Accounts). All transactions pending to be settled will be included taking into account a determined Price fluctuation and determined offsettings between correlated ISINs.

The outstading positions pending to be settled include buy and sell transactions, failed positions and only cash positions. Regarding the buy and sell positions to calculate risk, the net balance of buy and sell transactions will be taken into account.

Extraordinary Margins

Requested to hedge CCP risk in extraordinary cases.

Extraordinary Margins will be requested for: 

• Situation of high volatility where Clearing Member exceeds the Extraordinary Margin parameters.
• Drop of the Member´s Solvency ratio below the level corresponding to the investment grade.
• Exceptional situation or high-risk situation of a Clearing Member.

Default Fund

According with the Rule Book and Circulars, BME CLEARING has a Default Fund separated by segment. In this way, if a Clearing Member does not have position or activity in a segment, a Clearing Member default due to losses in that segment can never affect them.

The minimum amount of the Default Fund is specified in Default Fund Circular for each segment: 25 million euro for Fixed Income Segment.

 It is updated monthly and has a minimum amount that changes by Clearing Member typology and risk.

Individual Fund

It may be requested for different reasons:

• Individual Fund for Risk Limits.
• Fixed Income Segment Minimum Individual Fund.
• Individual Fund for not reaching the required minimum Own Resources.
• Individual Fund for Stress Testing of the Default Fund.
• Voluntary Individual Fund