Collateral Management -

managing collateral for clearing on Nasdaq derivatives markets

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Procedures and forms for management of collateral, cash and physical settlement.

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The Collateral Management Service

The Collateral Management Service (CMS) is the service managing collateral for clearing on Nasdaq Financial and Commodities derivatives markets. The service manages both cash and non-cash collateral for covering margin requirements as well as cash transactions for daily cash settlement (premiums, fees, variation margin (mark-to-market)). The collateral flows are managed in an advanced collateral optimization process taking into account both cash and non-cash collateral to optimize each participant’s use of collateral and to minimize the number of cash transactions to and from the service.

Participants hold specific custody accounts for use with the service and all custody accounts in the service can hold both cash and non-cash collateral integrated on the same account.

In addition, participants must hold a bank account within an approved settlement bank in each applicable currency for managing cash transfers to and from the service. To enable efficient cash transactions the service has an integrated payment system that with the use of direct debit instructions enable automatic cash transfers. Automatic cash transfers are, together with the use of the cash optimization feature, used to fully automate the flow of cash collateral to and from the collateral management service.

To control the flow of collateral, participants can also instruct collateral transactions outside the automated flow. Posting of supplementary cash collateral to a custody account is achieved by depositing cash to a Nasdaq Clearing collateral bank account in one of the settlement banks approved for the service. Bank accounts for this purpose are available for each of the eligible cash collateral currencies. Posting securities to a custody account is done through one of the CSDs/ICSDs connected to the collateral management service. Participants do not need to be a direct member of a CSD or ICSD but can use a settlement agent for executing securities transactions.

Collateral posted to Nasdaq can be segregated by

  • House
  • Group of clients
  • Group of indirect clients
  • or on a client-by-client basis,

based on the participant’s account setup.

The process of valuation and evaluation of collateral is fully automated and is done per segregation category (e.g. for house, clients, indirect clients and individual clients respectively). Posted collateral is valued daily using market prices taking into account applicable haircuts and pending transactions and is then evaluated to make sure the collateral value is sufficient to cover the participant’s margin requirement(s). In the case of a deficit a direct debit transaction is executed to cover the shortage and in the case of a surplus a credit instruction is automatically executed (subject to settings on each account).

Margin requirements, daily cash settlement information as well as information on cash optimization transactions are retrieved through Genium INET Clearing Workstation 1 and Q-Port, over the OMnet API, or via CMS Web. Settlement instructions for posting and withdrawing cash and securities are done via SWIFT Net, over MQ or through the CMS Web application.

Cash Optimization Procedures

The Cash Optimization Service is a payment netting arrangement whereby amounts in a Permitted Currency across all Clearing Accounts or Integrated Trading and Clearing Accounts held by a Clearing Member or Direct Clearing Client or an Account Holder are netted for operational efficiency. These Procedures set out certain operational aspects of that Cash Optimization Service. The Procedures should be read in conjunction with the above-mentioned rules, as applicable.

Cash Optimization Service Procedures

Collateral Management Timeline

Standing Settlement Instruction (SSI) – Collateral

Clearing members wishing to settle their securities contributions on T+0 must have placed complete settlement instruction on the respective CSD/ICSD at least two (2) hours prior to last settlement batch.

Standing Settlement Instructions - Collateral


Clearing Rules


Post Securities as Collateral

You may choose to cover your Margin Requirement with Securities. Prerequisites are that you either have direct access to your depository in the actual (I)CSD or use a Custody Bank.

You may choose to cover your Margin Requirement with Securities. Prerequisites are that you either have direct access to your depository in the actual (I)CSD or use a Custody Bank and in order to post securities as collateral you need to provide your SSI-details to Nasdaq.

When the SSI is in place, you process the deposit through the CMS WEB-portal. The instruction in CMS WEB creates Nasdaq’s receiving instruction (Free of Payment) to the actual (I)CSD, and you, or your Custody Bank must then send a matching instruction to the (I)CSD in order to have the deposit settled. When the securities are on Nasdaq’s depository a securities deposit message will be sent to the Clearing system which increases your collateral value connected to the custody (Margin) account in question.

The instruction and its status can be monitored in the CMS WEB-portal which also displays the collateral value after the deposit is settled. The portal also includes the list of securities eligible to post as collateral.

A Call back of securities works in the same way as a deposit. The instruction is registered in the CMS WEB-portal, the request for call back is sent to the Clearing system and is evaluated at 11:00 CET. If your collateral surplus allows, Nasdaq will send a delivery instruction (Free of Payment) to the (I)CSD which you or your Custody Bank must meet with your own receiving instruction in order to have it matched and settled on your own depository.

Eligible Collateral

The eligible collateral list is found in the Rules of the respective market and on the CMS Web.

For the Financial Markets the collateral list can be found under the appendices section (Appendix 14) of the Clearing Rules of Nasdaq Derivatives Markets.

The eligible collateral list for Nasdaq Commodities can be found in Appendix 10 of the General Terms of the Clearing Rules of Nasdaq Commodities.

The list of eligible collateral is continuously monitored and changed if deemed necessary. If a security type accepted as collateral is deemed riskier than acceptable, the collateral will be removed from the list. If a security type meets the criteria of having low market and credit risk, sufficient liquidity and daily prices, the security type can be added to the list of eligible collateral. Any such changes will be communicated via exchange notices well in advance.

Interest on Cash Collateral

Margin requirements may be fulfilled using approved securities or cash in the eligible currencies. Interest on cash contributions is calculated using the Nasdaq Deposit Rate (NDR). Current interest rates can be found on the CMS Web.

Interest will accrue daily and be capitalized on a monthly basis. After capitalization the capitalized interest will be paid to the participant’s bank account according to the settlement instruction supplied by the participant.

CMS Web Tool

Through the CMS Web application, a user can access custody-related information including complete management of collateral.

The CMS Web application will also hold margin requirements and collateral evaluation information from the clearing system. More information about the CMS Web tool can be found under the clearing Technology section.

Resource Center

Resource Center

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