Cash Collateral

BME Clearing manages cash collateral within a secure and transparent operational framework.

In general, Initial Margins and Individual Funds can be posted in cash in EUR and USD  by the Clearing Member or its Payment Agent in BME Clearing account in the payments module of the Target Banco de España platform system or in BME Clearing´s account at one of its eligible settlement banks in accordance with ‘Authorized settlement banks´ Instruction or by electronic pledge of securities or by transfer of ownership in IBERCLEAR, EUROCLEAR BANK or by transfer of ownership in SIX SIS. Default Fund contributions shall always be posted in cash Euro only, through Target2 platform as explained above.  

Extraordinary Margin, shall be posted in cash Euro, except in the event of a technical malfunction of the Target Banco de España  platform system, where Clearing Members may set up the Extraordinary Margin to be posted by means of cash in USD posted by the Clearing Member or its Payment Agent in BME CLEARING, by a transfer of ownership via transfer of securities free of payment in the BME Clearing securities account in IBERCLEAR, EUROCLEAR BANK or SIX SIS or by pledging securities in IBERCLEAR, EUROCLEAR BANK.

The variation of the Initial Margin shall be posted in cash in EUR as per the uncovered amount.

This total net amount shall be debited or credited to the relevant cash account in TARGET- Bank of Spain of the Clearing Member or of the Payment Agent appointed by such Clearing Member in the multilateral settlement of BME Clearing. 

BME Clearing shall carry out the settlement of fees, variation margin of margins, settlements derived from default management measures, and any other settlements established in the corresponding General Conditions or by Circular. 

For the delivery of cash amounts resulting from Settlements, Clearing Members must have an account in the Target2 system for EUR.

The Clearing Member may designate the entity which, holding an account in the established payment system, will act as its Payment Agent for payments of cash amounts resulting from the related Settlements. Such designation shall be subject to approval by BME Clearing. 

The Payment Agent acts in the name and on behalf of the Clearing Member. However, the Payment Agent’s activities do not change the responsibility of the Clearing Member towards the CCP in any way. The Clearing Member retains full responsibility with regards to their payment obligations to BME Clearing. 

The following concepts shall be settled daily in cash in euros through a debit or credit on the Payment Agent’s account in Target2 platform. Cash settlement will take place on T+1, being T the transactions’ date, including expirations and exercises of futures and options. 

It will be done via a standard Multilateral Settlement mechanism on the TARGET2 platform , where the credits and debits of each Clearing Member are offset:

All of BME Clearing’s cash settlements are conducted in European Central Bank money. 

Daily at 9 am, all cash settled concepts of the CCP are settled via a standard Multilateral Settlement mechanism on the TARGET2 platform, where the credits and debits of each Clearing Member are offset. 

Settlement is carried out pursuant to the agreement made between BME Clearingand Banco de España and under authorisation from the competent authority of the CCP pursuant to the CCP’s Rule Book.  Any incidents during settlement shall be regulated by the said agreement. 

If a Clearing Member does not have an account in the TARGET2 system it must appoint a Payment Agent who is a Clearing Member with an account in the TARGET2 platform. All CCP settlement are thus aggregated to the Payment Agent level. 

All intraday margins received by the CCP, either individual or extraordinary, made via a payment transfer or a direct debit, are also paid into the CCP’s account in the Target-2 platform.

The Collateral provided in cash shall be invested by BME Clearing, unless the Member or Client communicates its wish not to be invested, only possible in the case of EUR, in which case (non-investment decision), it shall be deposited in the account of  BME Clearing in the Eurosystem.

In cases where, given the currency in which the Collateral is provided, BME Clearing is obliged to invest the Collateral, as it is in the case of cash posted in USD, in compliance with the obligations set out in Delegated Regulation 153/2013 (EMIR), and the Member or Client may not, in these cases, request the non-investment of their Collateral in cash.

BME Clearing may invest the Margins posted in cash by means of re-purchase transactions (hereinafter "buy/sell back"), classic repos (reverse), or by direct purchase either through bilateral transactions or through BME Clearing's participation in the investment platforms, under the following conditions:

• The collateral accepted as margin for the investment should be Sovereign Debt in the currency type accepted as margin in the Circulars Margin collateral in the form of securities in IBERCLEAR margin collateral in the form of securities in  CLEARSTREAM, margin collateral in the form of securities in EUROCLEAR and Margin collateral in the form of securities in SIX SIS or that which replace these. In addition, for repos executed on the CO:RE platform, the collateral accepted for the investment may be securities contained in the SNB GC - L1 basket according to the list of eligible collateral for SNB repos published by the swiss national bank (SNB). The SNB basket shall not be available in the case of outright purchases of securities, neither in bilateral repos, nor in bilateral buy/sell backs.
• The counterparties of the investment should have a solvency level between s1 and s7, according to the circular ‘calculation of shareholders' equity and solvency’’, or the one replacing it.
• BME CLEARING will establish credit limits in accordance with the six group's investment policy according to the solvency ratio assigned to the counterparties and issuers. in the case of outright purchase transactions, the following concentration limits will also be considered:

        • The exposure of the investment to one issuer may not exceed 25% of the total invested by bme clearing.
        • The investment exposure may not exceed 10% of the outstanding balance of an issue.

At a CCP level, BME Clearing will also assess that, as a minimum 30% of the total amount of margins required by BME Clearing, in respect of all concepts and in all Segments, has been posted in cash, in Euros. 

If this amount falls below 30%, Clearing Members whose cash collateral is not at least 30% in cash (Euro) in respect to their margins required by BME Clearing, for all concepts and in all Segments, will be given five business days to recalibrate their collateral to attain this threshold. 

On a daily basis BME Clearing quantifies, both intra-day and at the end-of-day, the status of its liquid resources and consequently, its potential liquidity needs under various scenarios which include: