no 26/15 Upcoming Changes to Trading and Clearing Rules


Nasdaq will upgrade Genium INET to version 4.0.0240 during the weekend April 18-19, 2015. In conjunction with the upgrade, Nasdaq Commodities will make amendments to the following documents effective April 20, 2015:

  •  Clearing Rules – General Terms
  • Trading and Clearing Appendix 1 – Definitions
  • Trading and Clearing Appendix 2 – Contract Specifications
  • Trading and Clearing Appendix 3 – Trading and Clearing Schedule
  • Clearing Appendix 11 – List of Approved Settlement Banks

For full text black-lined versions, please see “Upcoming Changes to Rules” here.

 

The changes in the above mentioned documents will be made to reflect the following:

Cash Optimization

NASDAQ OMX Clearing AB (“Nasdaq Clearing”, the “Clearinghouse” or the “CCP”) is introducing changes to its service for collecting and managing collateral in its clearing operation (the Collateral Management Service or CMS). The changes aim to optimize the flows of collateral and cash settlement between the CCP and its counterparties. In brief, the CCP will use cash settlement amounts (primarily variation margin payments) due to the account holder to cover initial margin requirements, and excess cash collateral will be used to cover cash settlement amounts due to the clearing house. To determine whether there is excess cash available the CCP will look at all posted collateral (cash, securities and, if applicable, bank guarantees). This new feature is referred to as “Cash Optimization”. More information about Cash Optimization, including contact details, is found on the Cash Optimization website:

 http://www.nasdaqomx.com/transactions/posttrade/clearing/europeanclearing/collateral-management/cash-optimization.

Cash Optimization will be introduced on both Nasdaq Clearing’s financial derivatives markets and the Nasdaq Commodities market.  In order to implement this in the rules, to the extent possible the Clearing Rules presented below for Commodities are the same as those that will be introduced in Nasdaq Clearing’s Derivative Markets rulebook (the FIN Rules).  Therefore it should be noted that some existing provisions have been changed merely to harmonize the rulebooks.  

General Terms of the Clearing Rules

Section 3.4.2 sets out the requirements on Account Holders in relation to Cash Collateral Bank Accounts. This provision clarifies the requirements already applicable to Account Holders to open Cash Collateral Bank Accounts and issue a PoA to the relevant approved settlement bank, but also introduces an authorization by each Account Holder to the Clearinghouse to issue direct debits in relation to their Cash Collateral Bank Accounts, replacing the separate sign-on Mandate that is currently used by the Clearinghouse.

Section 3.6.2 is harmonized with the FIN Rules and sets out the terms and conditions under which the Collateral List may be amended.

Old Section 3.6.5 is moved to Section 5.

Sections 3.6.7-3.6.8 have been amended to reflect that they apply to non-cash collateral in general and not only bank guarantees.

Old Section 3.6.9 is removed since an identical provision is included in the Collateral List.

Section 3.6.10 has been included setting out the requirement to provide an account reference when manually (i.e. outside Cash Optimization) posting Collateral to the Clearinghouse and that Collateral missing such reference may not be taken into account to meet a margin requirement.

Section 3.6.11 requires each Account Holder to comply with any Locked Currency Limit determined by the Clearinghouse.

Old Section 3.6.14 is removed and replace by new Section 3.7.

Old Section 3.6.16 has been removed.

Section 3.7.1-3.7.3 and sections 3.7.5-3.7.7 set out the terms and conditions under which Collateral Surplus may be returned following the introduction of Cash Optimization.

Section 3.7.4 provides that Account Holders may establish a Cash Excess Amount that will be kept in their Margin Requirement Accounts.

Sections 3.10.1-3.10.2 are amended to reflect the information that the Clearinghouse shall make available to Account Holders, including a Cash Settlement Report, a Margin Requirement Report and a Payment Report. Statement of Account is no longer used in the Clearing System and is therefore removed as a defined term. 

 

Section 4.9.2 is amended to include a requirement for Client Representatives to ensure that its Clearing Clients pay any Cash Settlement Amount that is due to the Clearinghouse and pay such amount if its Clearing Client fails to do so. 

 

Chapter 5 on Margin Requirements, Collateral Sum and Provision of Collateral has been amended to reflect the introduction of Cash Optimization and to harmonize with the FIN Rules.

Section 5.1 has been updated to include a number of provisions that are generally applicable to Margin Requirements and the collection of Collateral. Section 5.1.2 has been removed since it is covered in other places in Section 5.

Section 5.3 reflects the use of the new terms End of Day Margin Determination (which broadly replaces the old defined term Daily Margin Requirement) and Clearinghouse Business Day. It sets out the rules with respect to the Margin Requirement for each Margin Requirement Account, the calculation of the Collateral Sum, the determination of Collateral Surplus and Collateral Deficiency and the Margin Requirement Report, as applied to each End of Day Margin Determination.

Section 5.4 is new and sets out the relevant rules in respect of the collection of Collateral through the Cash Optimization Service.

Section 5.4.1 refer to the Procedures which is an operational document setting out the details for the Cash Optimization Service.

Section 5.4.2 regarding the provision of Collateral reflects the operation of the Cash Optimization Service in collecting any outstanding Collateral that has not been provided at the requisite time.

Sections 5.4.3-5.4.5, reflecting the key feature of the Cash Optimization Service, authorize the Clearinghouse to use Collateral Surplus to cover Cash Settlement Amounts due to be paid by the Account Holder and vice versa. Section 5.4.5 specifically requires the Account Holder to cover any remaining deficiency and entitles the Clearinghouse to provide any remaining surplus to the Account Holder.

Sections 5.5.1-5.5.6 which deal with margin requirements pursuant to an intraday and extraordinary margin requirements have been updated, partly to harmonize with the FIN Rules.

Section 5.6.1 sets out how multiple, simultaneous outstanding margin requirements shall be met.

Section 5.6.2 introduces a right for a Clearing Client to appoint a third party to administer the provision of Collateral to the Clearinghouse.

 

Chapter 6 on Settlement Procedures has been amended to reflect the introduction of Cash Optimization and to harmonize with the FIN Rules.

Section 6.1 has been updated to include a number of provisions that are generally applicable to Settlement.

Section 6.2 is new and sets out the rules with respect to Cash Settlement Procedures and the calculation of the Cash Settlement Amount following the implementation of Cash Optimization. They largely replace old Section 6.2.1 and 6.2.5, which have been removed.

Sections 6.2.1-6.2.3 set out the Clearinghouse’s obligation to determine the Cash Settlement Amount and provide a Cash Settlement Report.

Section 6.2.4, reflecting the key feature of the Cash Optimization Service, sets out that amounts due to or from the Clearinghouse in Settlement shall be used to set-off as applicable any Collateral Surplus or Collateral Deficiency in accordance with sections 5.5.3-5.5.4.

Sections 6.2.5 and 6.2.6 set out how the CCP issues direct debit and credit instructions on the Account Holder’s bank account(s).

Section 6.4 is new and sets out the terms and conditions under which the Clearinghouse operates the Cash Optimization Service.

Section 6.4.1 states that the Clearinghouse will create one or several so-called Cash Optimization Accounts (as defined) for each Account Holder.

Section 6.4.2 sets out that the Clearinghouse will provide a Payments Report setting out the payments due in each applicable currency.

Section 6.4.3 provides that the Clearinghouse’s calculations in respect of currency amounts to be paid shall be made in accordance with the Procedures, a document which alongside the Clearing Rules will set out the details of the Cash Optimization Service and which will be made available on the Clearinghouse website.

Section 6.4.4 explains the significance of the Cash Optimization Account and that all payments made to and from such account shall be deemed provided to or from each of the relevant Cash Optimization Accounts at such times that the amounts set out in the Payments Report are made to and from the Clearinghouse.

Section 6.4.5 states that payments set out in the Payments Report shall be made in accordance with the direct debit facility and that the Account Holder is responsible to have the requisite funds in its relevant bank account for such payment to be made.

Section 6.4.6 provides that the Cash Optimization Service shall be operated in accordance to the Procedures. 

 

Joint Appendix 1 - Definitions

  • The following new defined terms have been added:

Base Currency, Cash Collateral, Cash Collateral Bank Account, Cash Excess Amount, Cash Optimization Account, Cash Optimization Service, Cash Settlement Report, Clearinghouse Business Day, CMS System, Collateral Deficiency, Collateral Receipt Cut-Off Time, Collateral Sum, Collateral Surplus, End of Day Margin Delivery Time, End of Day Margin Determination, Locked Currency Limit  Margin Requirement Report, Non-Cash Collateral, Payments Report, Permitted Currency, Procedures and Surplus Cash Collateral.

 

  • The following existing defined terms have been amended to reflect the operation of the Cash Optimization Service and to harmonize with the FIN Rules:


Collateral, Cash Settlement Amount, Extraordinary Margin Requirement, Intraday Margin Requirement, Margin Requirement Account, Settlement and Settlement Day.

 

  • The following existing defined terms have been removed:

Collateral Deadline, Daily Margin Requirement, Mandate and Statement of Account.

 

Joint Appendix 2 – Contract Specifications

Certain defined terms that are no longer used have been removed or replaced. In addition a smaller number of corrections have been made that are not related to Cash Optimization.

 

Joint Appendix 3 – Trading and Clearing Schedule

Times with respect to Cash Settlement and Margin Requirements (which are the same regardless of product or contract group) have been removed and will be included in the Procedures.

 

Other changes

  • Nasdaq Commodities will introduce one additional Day-Ahead Future Day 6 Contract for SEK El-Cert. Please note that this change is not applicable for El-Cert EUR. The changes affect Appendix 2 – Contract Specifications, Part C Quotation list, Section 4.1 and Part D Section 4.1.
  • Exercise time for German Option has been included in Section 1.2 of Appendix 3 – Trading and Clearing Schedule to correct a previous error.
  • In Appendix 3 – Trading and Clearing Schedule GMT has been replaced by UKLT, meaning United Kingdom local time, to reflect that summer savings time applies.
  • Clearing Appendix 11 – List of Approved Settlement Banks is updated.

 

For further information, please contact Nasdaq Commodities:

Mette Steinsland, Legal Counsel, phone +47 67 10 80 71/+47 40 03 51 18 mette.steinsland@nasdaqomx.com

For Cash Optimization:

Adam Göransson, Legal Counsel, phone +46 8 405 6109/ +46 73 449 6109
adam.goransson@nasdaq.com

 

Media contact:

Sara Aadnesen, Director Corporate Communications, phone +47 9060 0759, sara.aadnesen@nasdaq.com

 

About Nasdaq

Nasdaq (Nasdaq: NDAQ) is a leading provider of trading, exchange technology, information and public company services across six continents. Through its diverse portfolio of solutions, Nasdaq enables customers to plan, optimize and execute their business vision with confidence, using proven technologies that provide transparency and insight for navigating today’s global capital markets.  As the creator of the world’s first electronic stock market, its technology powers more than 70 marketplaces in 50 countries, and 1 in 10 of the world's securities transactions. Nasdaq is home to more than 3,500 listed companies with a market value of over $8.8 trillion and more than 10,000 corporate clients. To learn more, visit www.nasdaq.com/ambition or www.nasdaqomx.com.

About Nasdaq Commodities

Nasdaq Commodities is the brand name for the worldwide suite of commodity related products and services offered by Nasdaq. The Nasdaq Commodities offerings include power, natural gas and carbon emission markets, tanker and dry cargo freight, fuel oil, seafood derivatives, iron ore, electricity certificates and clearing services.

NASDAQ OMX Oslo ASA is the commodity derivatives exchange authorized by the Norwegian Ministry of Finance and supervised by the Norwegian Financial Supervisory Authority. All trades with NASDAQ OMX Oslo ASA are subject to clearing with Nasdaq Clearing.

About Nasdaq Clearing

Nasdaq Clearing is the trade name of NASDAQ OMX Clearing AB which is authorized and supervised as a multi-asset clearinghouse by the Swedish Financial Supervisory Authority in Sweden as well as authorized to conduct clearing operation in Norway by the Norwegian Ministry of Finance.


For more information, visit www.nasdaqomx.com/commodities

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