Overview

Procedures and Forms for Management of Collateral, Cash and Physical Settlement

Collateral Management Service

The Collateral Management Service (CMS) is the service managing collateral for clearing on Nasdaq Financial 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 cash 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 Collateral Management Service.

Participants hold specific custody accounts at Nasdaq Clearing for use with the Collateral Management Service and both cash and non-cash collateral can be registered on the same custody 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 Collateral Management 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/custodians 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 to execute securities transactions.

Calculation of Margin Requirement

Collateral posted to Nasdaq can be segregated by the clearing member's house, a group of clients, a 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) as further described in the rules. During the daily cash optimization process, posted collateral is valued 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 case of 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 or over the OMnet API. Settlement instructions for posting and withdrawing cash and securities are done via SWIFT Net, over MQ or through Q-Port.

Through Q-Port, a user can access custody-related information including complete management of collateral. Q-Port also holds margin requirements and collateral evaluation information from the clearing system. More information about Q-Port tool can be found under the clearing Technology and Connectivity section.

Cash Optimization

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 are netted for operational efficiency. Certain operational aspects of Cash Optimization Service are described in Cash Optimization Service Procedures document.

The daily cycle illustrated in the figure below provides an overview of the daily events and when they occur.

Eligible Collateral

Margin requirements may be fulfilled using approved securities or cash in the eligible currencies. The eligible collateral list is found in the Rules of the respective market and on Q-Port.

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 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

Interest on cash contributions is calculated using the Nasdaq deposit rate (NDR). Current interest rates can be found in Q-Port.

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

Spread on cash collateral from 1^st of May:

Currency	EUR	SEK	DKK	NOK	USD	GBP
Reference Rate	€STR	Swedish Central Bank Policy Rate	Certificate of Deposit Rate	Norwegian Repo Rate	FED Funds	SONIA
CMS spread (bp)	32	32	32	32	32	32
Default Fund spread (bp)	10	10	10	10	10	10
Day count basis	Actual/360	Actual/360	Actual/360	Actual/360	Actual/360	Actual/365

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 in relation to such (I)CSD and in order to post securities as collateral you need to provide your SSI-details to Nasdaq Clearing via the Member Portal request.

When the SSI is in place, you process the deposit through Q-Port. The instruction in Q-Port 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 deposit is settled in the I(CSD), a deposit confirmation 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 Q-Port, 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 Q-Port, the request for call back is sent to the clearing system and is evaluated at 11:05 CET. If your collateral surplus allows, the system 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.

Cancellation of Instrument Collateral Settlement Instructions

Settlement instructions, that were not matched/settled towards Nasdaq Clearing before end of day on the intended settlement day, will be cancelled at CMS closing time or in some cases by 9:30 CET cash optimization batch next morning.

As matched instructions must be bilaterally cancelled, Nasdaq Clearing's counterparties are expected to also cancel their instruction. If cancellation instructions are matched, bilateral cancellation will take place.

Fee List

Fee Type	Fee Detail	Fee Excluding VAT	VAT
Safekeeping Fee	Safekeeping Fee	40 EUR/Month/Custody Account	X
CSD/ICSD Segregation Fee	CSD/ICSD Segregation in	200 EUR/Month/Account	X
	CSD/ICSD Segregation in beneficial owner account	200 EUR/Month/Account	X
Security Collateral Fee Nasdaq Derivatives Markets	Securities	Tiered model, see separate section below
		For any amount exceeding the total margin requirement, 0 bp¹²
Security Collateral Fee Nasdaq Default Fund	Securities	Up to the total default fund requirement, 12 bp annualized on market value
		For any amount exceeding the default fund requirement, 0 bp
Corporate Action	Voluntary Corporate Action	TBD	X
Securities Transaction Fee	Deposit	Free
	Call Back	Free
Cash Transaction Fee	Deposit	Free
	Call Back	30 EUR/Transaction
Premium Subscription Fee	Daily statements	60 EUR/Month/Custody Account	X
	MT535 Statement of Holdings
	MT536 Statement of Transactions
	MT940/camt.05 3 Customer Statement

¹ 0 bp for securities held by clients active in IRS OTC clearing.
² 0 bp for securities held in Intraday Funding Collateral Account.

Fee types, levels and VAT subject to change. Fees subject to VAT according to Council Directive 2006/112/EC of 28 November 2006.

Safekeeping Fee

All collateral posted by the account holder is registered/reflected on custody accounts in Nasdaq's system. An account holder will typically hold one custody account for house business and one custody account for client business. In addition, separate custody accounts per segregated clients are supported.

A fixed safekeeping fee in EUR per month and per custody account is charged.

CSD/ICSD Segregation Fee

An account holder can request its securities collateral to be segregated at the CSD/ISCD. In this case, Nasdaq will hold the securities on an individual securities account on behalf of client in the CSD/ICSD. Segregation on beneficial owner accounts is supported where regulations requires.

Security Collateral Fee

Nasdaq Derivatives Markets

Nasdaq applies a security collateral fee for securities calculated in basis points annualized on market value. The fee level depends on the proportion of cash and securities on the custody account and the total market value of the securities collateral that is used to cover the total margin requirement. Actual fee levels can be found in the table below. The fee is charged on a monthly basis by aggregation of the daily fee calculation based on end of day security market value on the custody account, excluding any excess collateral. The fee is calculated using actual/360-day convention.

Nasdaq Default Fund

Nasdaq applies a security collateral fee for securities calculated in basis points annualized on market value. The securities market value is calculated per holding on the default fund custody account on a daily basis. The fee is charged on a monthly basis by aggregation of the daily fee calculation based on end of day security market value on the default fund custody account, excluding any excess collateral. The fee is calculated using actual/360-day convention. No tiers or other rebates are applicable for the securities collateral fee on the Nasdaq Default Fund. Bank guarantees cannot be used on the default fund.

Subscription Service

Account holders can subscribe to the statement of holdings, statement of transactions, customer statement message and fee instruction services. The service is offered free of charge for monthly statements. The subscription can be requested through completing the Member Preferences – Fees and Subscriptions form (Appendix 4) and submitting it to Nasdaq.

The subscription includes monthly statements distributed on the last business day of the month.

MT535 Statement of Holdings (SWIFTNet or email/PDF) - holdings last day of month
MT536 Statement of Transactions (SWIFTNet) - transactions during the month
MT940 Customer Statement Message (SWIFTNet or email/PDF) - transactions during the month, including opening balance and closing balance
Fee Instruction (email/PDF)

Account holders who prefer daily statements can sign up for the premium subscription service through completing the Member Preferences – Fees and Subscriptions form and returning this to Nasdaq. The premium subscription service is associated with a monthly fee per custody account and includes statements of the following:

MT535 Statement of Holdings (SWIFTNet or email/PDF)
MT536 Statement of Transactions (SWIFTNet)
MT940 Customer Statement Message (SWIFTNet or email/PDF)

MQ Connection

Account holders can connect to the Custody System through MQ. Contact Nasdaq for more information.

Tiered Model

End of day market value of the securities collateral in the custody account. Fee will be charged for all applicable tiers.	Security collateral fee for custody accounts where cash collateral constitutes 20% or more of the total collateral value used to cover total margin requirement	Security collateral fee for custody accounts where cash collateral constitutes less than 20% of the total collateral value used to cover total margin requirement
> EUR 250 million	10 bps	15 bps
< EUR 250 million	12 bps	17 bps

On a daily basis, the total collateral market value is calculated per holding on the Custody Account in the collateral denominated currency. The amounts are then converted to EUR using the exchange rates for that day.

Voluntary Corporate Actions

An administrative fee for voluntary corporate action will be charged.

Securities Transaction Fee

Deposit of securities is free of charge. Instrument callback of securities is associated with an administration fee.

MQ Connection

Account holders can connect to the Custody System through MQ. Contact Nasdaq for more information.

Support

For Questions About	By Phone or Email
Clearing Operations	clearing@nasdaq.com +46 8 405 6880
Member and Account Configuration	MAC@nasdaq.com
Risk Management	clearing.risk@nasdaq.com +46 8 405 7088
Nordic Exchange Services	EMO@nasdaq.com +46 8 405 7700

Learn More About Nasdaq Clearing

Resource Center

Service

Cash Optimization Service Procedures

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Legal Documents

Nasdaq Collateral Custody Account Agreement

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General Terms for Collateral Custody Accounts

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Nasdaq Default Fund Custody Account Agreement

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General Terms for Default Fund Custody Account Agreement

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Loss Sharing Custody Account Agreement

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General Terms for Loss Sharing Account Agreement

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SSIs

Nasdaq SSIs for placing Collateral (Cash and Securities)

Download

Member Cash collateral SSI form (All currencies)

Download

Related Information

Governance, Policies, Regulations

About Nasdaq Clearing

Legal and regulatory information from and about Nasdaq Clearing AB.

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Clearing Rules

Rules & Regulations

Clearing Rules

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Technology and Connectivity

Technology

All markets are cleared in a collateral management system.

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Approved Settlement Banks

Settlement Banks

Banks approved for settlement with Nasdaq Clearing.

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Settlement, Expiration and Delivery

Nasdaq Clearing

Expiration and delivery procedures for derivatives contracts.

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