Margins

BME CLEARING SWAPS in order to cover for possible potential losses to which it is exposed under the IRS segment, requires the following margins from its Clearing Members:

Initial Margin

It represents the potential loss of value that could be due to variation in interest rates during the five days deemed necessary to liquidate the positions in case of default. It is calculated at the account level.

This margin covers the risk of loss during the process of liquidating the Clearing Member's own position and their clients in case of default.

Variation Margin

It represents the portfolio's unrealised gain or loss. Is the daily sum of the Net Present Value (NPV) of the positions.

Individual Fund

This is only requested to Clearing Members. It consists of various items depending on the type of member and its solvency, consumption of limit risk and extraordinary situations arising (in this case the margin is called extraordinary margin). This type of margin only covers obligations from the Clearing Member, and can never be used to cover another Member’s default.

Default Fund

This is a joint liability guarantee. It will be used only to cover the default of another learing member in case all other margins from the clearing member plus the BME Clearing´s margins are not sufficient to cover the obligation.

On a monthly basis, BME Clearing will do a stress test, comparing the risk in stress test situations for each clearing member within the IRS segment default fund. In accordance with the corresponding Circular an additional individual margin will be requested to the Clearing Member, if necessary.

BME Clearing guarantee

Margin posted by the Clearing House, greater or equal to the biggest contribution to the default fund by any clearing member in the IRS Segment. The amount is set by Circular.