Clearing Model -

a broad range of options for market access, segregation and portability

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Nasdaq Clearing provides central counterparty clearing for exchange traded and OTC derivatives in equities, fixed income and commodities.

bruges, belgium

 

The clearing model offers market participants a wide range of alternatives for market access. This includes capital efficiency for clearing members and clients through offsets between asset classes and streamlined settlement flows. This is key in our ambition to create margin, legal and operational efficiency for clearing members, clients and indirect clients.

Nasdaq Clearing offers clearing through 3 access possibilities:

  • as a clearing member
  • as a client
  • as an indirect client

 

Clearing Membership Types

To be eligible for clearing membership at Nasdaq Clearing, market participants must meet certain minimum requirements depending on membership type and the products to be cleared. The minimum requirements can be found in the Clearing Rules of Nasdaq Derivatives Market and the Clearing Rules of Nasdaq Commodity Derivatives. Please also see the Membership Requirements section of the web. The following membership types have access to the clearing house:

  • General Clearing Member (GCM);
  • Direct Clearing Member (DCM);
  • Clearing Member (CM);
  • Direct Clearing Client (DCC).
General Clearing Member

Clears on its own behalf and on behalf of clients and Non-Clearing Members. The General Clearing Membership type is applicable for both the financial and commodity derivatives markets.

Direct Clearing Member 

Clears on its own behalf and on behalf of clients (not Non-Clearing Members). The Direct Clearing Membership type is only applicable for the financial derivatives market.

Clearing Member 

Clears on its own behalf and on behalf of clients (not Non-Clearing Members). The Clearing Membership type is only applicable for the commodity derivatives market.

Direct Clearing Client 

Clears on its own behalf and on behalf of clients (not Non-Clearing Members). The Direct Clearing Client must appoint a Direct Clearing Agent. The Direct Clearing Client Membership type is applicable for both financial and commodity derivatives markets.

The Direct Clearing Client has a direct legal relationship with Nasdaq Clearing via a tripartite agreement between Nasdaq Clearing, the Direct Clearing Client and a Direct Clearing Agent (see description below). The Direct Clearing Client is Nasdaq Clearing’s counterparty even if it acts through a clearing member who is the Client’s Agent.

The model combines features of a clearing membership and a normal client relationship with a clearing member. The Direct Clearing Client is fully liable towards Nasdaq Clearing and takes full responsibility for providing collateral and for paying cash settlement amounts that are due to Nasdaq Clearing.

A Direct Clearing Client’s positions and collateral are fully segregated from the Clearing Member acting as Direct Clearing Agent and there is a one-to-one relationship between each Direct Clearing Client’s position account and custody account.

 

Additional Clearing Membership Type Information

Direct Clearing Agent

Acts as an intermediary between the Direct Clearing Client and Nasdaq Clearing. General Clearing Members, Direct Clearing Members, Clearing Members and, in certain circumstances, a Non-Clearing Member can act as a Direct Clearing Agent.

Non-Clearing Member

The Non-Clearing Member has an exchange membership agreement with Nasdaq Stockholm AB or Nasdaq Oslo ASA and clears via a General Clearing Member.

 

Additional Client Information

Segregation

Segregation is the separation of collateral and positions between a clearing member and its clients. Segregation can also be between clients.

Portability

The ability to transfer client positions and collateral from one member to another, in a situation where the first member has defaulted. If portability works well, the client can continue trading and clearing, via another member (back-up member) without interruption.

Back-up Member

If a client has an agreement with a back-up member prior to a default, it is an important factor in increasing the likelihood of porting positions and collateral since there will be limited time to negotiate an agreement with a back-up member in a default situation.

Risk Disclosure Document

The Risk Disclosure document describes the levels of protection and the costs associated with the different levels of segregation offered by Nasdaq Clearing, as well as certain risks that are associated with the process of clearing derivatives through Nasdaq Clearing, based on the Clearing Rules of Nasdaq Derivatives Market and the Clearing Rules of Nasdaq Commodity Derivatives.

 

Membership Process

Participants get access to Nasdaq Clearing’s markets by entering into a membership agreement for clearing. Upon approval of the membership application, the legal entity is admitted as a clearing member. 

Please see below for more detailed information.

Derivatives Membership application and onboarding process

https://www.nasdaq.com/solutions/derivatives-membership

Commodities Membership

https://www.nasdaq.com/solutions/commodities-membership

 

Client Account Types

Nasdaq Clearing offers several different solutions for client clearing, including different levels of segregation of client positions and collateral, please see the Risk Disclosure Document for detailed information. The following account type alternatives for clients are offered by Nasdaq Clearing.

Omnibus Net Account

The Omnibus Net account is an integrated trading and clearing account for managing the positions of several clients. Clearing Members can choose to set up several Omnibus Net accounts for administrative purposes.

The margin requirement for an Omnibus Net account is calculated from the total net position across all the clients as a netted total portfolio (i.e. correlation between all instruments and full netting is used). The net margin requirement must be covered by assets on the Omnibus Net account’s collateral account.

Clients whose positions reside on an Omnibus Net account do not have a direct legal relationship with Nasdaq Clearing and as a consequence have credit and counterparty risk against their clearing member.

Omnibus Gross Account

The Omnibus Gross account is an integrated trading and clearing account for managing the positions of several clients. Clearing Members can choose to set up several Omnibus Gross accounts for administrative purposes.

The margin requirement for an Omnibus Gross account is calculated for each client’s position separately and the gross sum of these Margin requirements must be covered by assets on the Omnibus Gross account’s collateral account.

Clients whose positions reside on an Omnibus Gross account do not hold a direct legal relationship with Nasdaq Clearing and as a consequence have credit and counterparty risk against their clearing member.

End Client Omnibus Account (ECO)

End client omnibus account is an omnibus account that from a service and operational point of view designed for the retail segment. End client omnibus account is defined as an Omnibus Net/Omnibus Gross account in Clearing Rules of Nasdaq Derivatives Market.

ECO Net

  • One or more clients per clearing account
  • Netting of client positions are possible
  • Initial Margin is calculated from total net position (for sub-accounts, Initial Margin is calculated for each client's positions separately)

 

ECO Gross

  • One or more clients per clearing account
  • No netting of clients positions
  • Initial Margin is calculated for each client's positions separately

Single Client Account (SCA)

Single client account is a sub-account for an omnibus account designated to have only one client per account.

Each SCA must be fully collateralized by reference to the margin requirement of the open positions on such SCA, which shall be calculated on a net position of the SCA (which will be for a single client only), but on a gross basis vis-à-vis the connected omnibus account. Clearing member is fully liable to provide collateral in respect of an SCA (and omnibus account).

Individually Segregated Client Account (ISA/ICA)

The Individual segregated client account is an integrated trading and clearing account for one individual client where both positions and collateral are fully segregated to allow portability arrangements entirely independently from any other client account.

The margin requirement for an Individual segregated client account is calculated for the net position on the account (i.e. correlation between all instruments and full netting is used). The net margin requirement must be covered by assets on the ICA/ISA’s collateral account. There is a one-to-one relationship between each Individual segregated client account and custody account.

Indirect Clearing Account

Nasdaq Clearing offers several different solutions for indirect client clearing, including different levels of segregation of indirect client positions and collateral. The following alternatives for indirect clients are offered by Nasdaq Clearing.

Net Omnibus Segregated Account (NOSA)

The Net Omnibus segregated account is an integrated trading and clearing account for managing the positions of several indirect clients. Clearing Members can choose to set up several Net omnibus segregated account for administrative purposes.

The margin requirement for a Net Omnibus segregated account is calculated from the total net position as a netted total portfolio (i.e. correlation between all instruments and full netting is used). The net margin requirement must be covered by assets on the Net segregated Omnibus account’s collateral account.

 

Gross Omnibus Segregated Account (GOSA)

The Gross omnibus segregated account is an integrated trading and clearing account for managing the positions of several indirect clients. Clearing Members can choose to set up several Gross omnibus segregated accounts for administrative purposes.

The margin requirement for a Gross Omnibus segregated account is calculated for each indirect client’s positions separately and the gross sum of these margin requirements must be covered by assets on the Gross omnibus segregated collateral account.

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