no 82/13 Changes to the Clearing Rules – EMIR re

NASDAQ OMX Clearing AB (the “Clearinghouse”) publishes updated Clearing Rules.

The amendments presented herein will come into effect not later than such time that the Clearinghouse obtains authorization to provide clearing services as a CCP under the Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (” EMIR ”). Once the Clearinghouse has confirmed when these changes will come into effect, the Clearinghouse will notify its members.

Please note that the amendments referenced herein are subject to change following further discussions with relevant regulatory authorities.

Background In connection with the EMIR approval process, the Clearinghouse has carried out a review of its clearing rules. As a result of the review, the Clearinghouse has identified a number of areas where the clearing rules need to be clarified and amended.

Furthermore, the Clearinghouse is currently in the process of obtaining legal opinions on the enforceability of its clearing rules in a number of jurisdictions where its clearing members are established. In this process the Clearinghouse has identified areas in the rules where clarifications are needed. The intention in relation to these changes has only been to clarify and remove ambiguities.

The following documents are affected by the update:

• Clearing Rules – General Terms
• Joint Appendix 1 – Definitions
• Clearing Appendix 12 – Supplemental default rules – Client Clearing Accounts
• Clearing Appendix 13 (NEW) – Supplemental default rules – Clearing Client Clearing Accounts
• Default Fund Custody Account Agreement
• General terms for Default Fund Custody Accounts
• General terms for Collateral Custody Accounts

A summary of the changes follows below. For full versions of updated documents please refer to:

http://www.nasdaqomx.com/commodities/Marketac...gestorules

CHANGES IN THE GENERAL TERMS

Cover page. On 3 September 2013, the Clearinghouse changed names from NASDAQ OMX Stockholm AB to NASDAQ OMX Clearing AB in connection with a de-merger where the clearing operations remained in the same legal entity. 

List of Clearing Agreements. GBP Letter of Credit is removed and will no longer be available.

List of Clearing Appendices. New Supplemental default rules – Clearing Client Clearing Accounts. Please see separate comment below.

Section 3.1. It is clarified that General Clearing Members may be Client Representatives.

Section 3.2. A cross reference has been corrected and a provision regarding “External Counterparties”, which is not used, is removed.

Section 3.3.1. it is clarified that the Clearinghouse may establish a Client Clearing Account, i.e. an Omnibus Account or an ICA, for a new General Clearing Member when approving such GCM.

Section 3.3.3. Changes have been made to clarify the structure of Clearing Clients’ Clearing Accounts and how such account is classified for the purposes of EMIR.

Section 3.3.5. Changes have been made to clarify the structure of the Omnibus Account and how the Omnibus Account is classified for the purposes of EMIR.

Section 3.3.6. Changes have been made to clarify the structure of the Individual Client Segregated Account (ICA) and how the ICA is classified for the purposes of EMIR.

Section 3.3.7. New section has been added to clarify that the use of Intraday Accounts does not affect the segregation requirements under EMIR.

Section 3.3.8. Changes have been made to clarify that the use of Clearing Portfolios does not affect the segregation requirements under EMIR.

Section 3.3.10. Changes have been made to clarify that the GCM/Clearing Member may only register Transactions on its House Account that it has entered into on its own behalf. Transactions on behalf of anyone else, including Transactions on behalf of companies within the same group of companies as the member, shall be registered either on a Client Clearing Account or a Clearing Client’s Clearing Account.

Section 3.3.13. Changes have been made to clarify that any account structures deviating from a standard structure must fulfill EMIR requirements.

Section 3.6.4. Changes have been made to clarify that any use of Collateral will be in accordance with EMIR.

Sections 3.6.6-3.6.8. Provisions have been added in relation excess collateral and the method for recording collateral.

Section 3.6.9. Changes have been made to clarify that the Clearinghouse will not accept any guarantee as Collateral which is not compliant with EMIR or any other law or regulation. Furthermore, a requirement for financial counterparties to replace guarantees with other Collateral at the latest on 1 October 2013 is removed.

Section 3.6.16. Changes have been made to clarify that any collateral arrangements deviating from a standard arrangement must fulfill EMIR requirements.

Section 3.10.3. Changes have been made to ensure the Clearinghouse’s right to obtain relevant information from the Account Holders for monitoring and regulatory purposes. The change reflects an existing provision in the Clearinghouse’s clearing rules for the NASDAQ OMX Derivatives Markets.

Section 3.12. It has been clarified that the general pledge shall not be used in a manner so as to override the segregation requirements in EMIR.

Section 4.1. An addition has been made to clarify that all variable fees are entered into the Security Settlement System in connection with the registration of the related Clearing Transaction. The addition is made following discussions with the Norwegian FSA. In addition, certain cross references have been corrected.     

Section 4.4. The removal of old section 4.4.2 reflects that Transactions made on behalf of Clearing Clients must be segregated in accordance with EMIR, see also Section 3.3.10. Furthermore, changes have been made to clarify that the use of Intraday Accounts does not affect the segregation requirements under EMIR, see also Section 3.3.7.

Section 4.5. References to “External Counterparties” are removed.

Section 4.7. A change has been made to clarify that Clearing Transactions for Clients must be segregated.

Section 4.8.2. Changes have been made to clarify that Collateral for Clearing Clients may not be held on the Client Representative’s Collateral Custody Account.

Section 5.2.1. It has been clarified that the Default Fund requirement of an Account Holder is taken into account when determining the Base Collateral Requirement.

Section 5.3.4. This section, with relates to time and inter-commodity spread credit, has been removed from the Clearing Rules. Details on spread credits will instead be set out elsewhere.

Section 5.4.1. It has been clarified that calculation of Margin Requirements are made regularly (currently once every hour during business hours), and not continuously.

Section 8.1.1. Changes have been made to ensure that the Clearinghouse has appropriate rights to call a Default Event, for example in cases where the Account Holder is in default under the Trading Rules or the FIN Clearing Rules. The changes are made to harmonize the Clearing Rules with the Clearinghouse’s clearing rules for the NASDAQ OMX Derivatives Markets. 

Section 8.2.2. The portability process previously included for Clients has been expanded to also cover Clearing Clients. A new appendix 13 has been added to the Clearing Rules to describe this process. Please refer to the new separate Appendix 13 for more details on such process. It has furthermore been clarified that Collateral provided in respect of a Client Clearing Account may only be used in relation to such account.

Section 8.4. Changes have been made reflecting the new EMIR compliant portability process for Clearing Clients. Please refer to the new separate Appendix 13 for more details on such process.

Section 8.7.1. A duplication has been removed.

Section 8.8. It has been clarified that the determination of a Termination Amount in the event of the default of the Clearinghouse is subject to the segregation requirements set out in the Clearing Rules and in EMIR.

Section 8.9. The notification procedure in the event of an Account Holder default has been clarified to include, among other things, that the Clearinghouse is required to contact the competent authority prior to calling an event of default.

Section 9.3. It has been clarified that the indemnity in this section shall not be used in a manner that would override the segregation requirements in EMIR.

Section 9.5. As required under EMIR, a right for the Clearinghouse to access the offices of Account Holders to conduct audits or otherwise obtain information to monitor the Account Holders’ compliance with the Clearing Rules has been included.

Sections 12.5-12.6. A right for the Clearinghouse to publicly disclose breaches by the Account Holders of certain provisions in EMIR and to use information in relation to any Account Holder or Client where it is necessary to enable proper performance of its activities has been included.

Section 13. In order to comply with requirements under EMIR, a new section regarding record keeping has been added.

Section 14. In order to comply with requirements under EMIR, a new section regarding the complaints procedure has been added.

Section 15. A new section regarding the recovery and resolution procedure has been added.

Section 16. A new section regarding trade reporting has been added.

CHANGES IN THE DEFINITIONS Certain defined terms have been added, removed and/or updated to reflect the changes made in other sections of the Clearing Rules.

CHANGES IN CLEARING APPENDIX 12 – SUPPLEMENTAL DEFAULT RULES FOR CLEARING TRANSACTIONS RECORDED ON CLIENT CLEARING ACCOUNTS

Appendix 12 has been further updated to ensure compliance with EMIR, and as a result of the legal opinion work, to ensure that the provisions set out therein are enforceable in the relevant jurisdictions. In particular, we have introduced certain provisions that must be reflected in the contractual arrangement entered into between a GCM/Clearing Member and its clients.

NEW CLEARING APPENDIX 13 – SUPPLEMENTAL DEFAULT RULES FOR CLEARING TRANSACTIONS RECORDED ON CLEARING CLIENT CLEARING ACCOUNTS

This new appendix 13 has been introduced to fulfill the EMIR segregation and portability requirements for outstanding positions and Collateral also for Clearing Clients.

DEFAULT FUND CUSTODY ACCOUNT AGREEMENT AND ITS GENERAL TERMS

These documents have been updated to reflect the provisions of the Collateral Custody Account Agreement and its General Terms, and as a result of the legal opinion work.

GENERAL TERMS FOR COLLATERAL CUSTODY ACCOUNTS

Definition of Secured Sums. This definition has been amended to ensure it accurately reflects the security granted.

Section 5.4. Changes have been made to reflect the fact that the Clearing House will keep separate records of pledged securities to enable it to distinguish securities registered on one Collateral Custody Account from securities registered on any other custody account and the Clearing House own assets.

For further information, please contact NASDAQ OMX Commodities: Adam Göransson, Associate General Counsel, phone +46 8 405 6109, adam.goransson@nasdaqomx.com ,

Media contact: Sara Aadnesen, Director Corporate Communications, phone +47 9060 0759, sara.aadnesen@nasdaqomx.com  

About NASDAQ OMX The inventor of the electronic exchange, The NASDAQ OMX Group, Inc., fuels economies and provides transformative technologies for the entire lifecycle of a trade - from risk management to trade to surveillance to clearing. In the U.S. and Europe, we own and operate 26 markets including 3 clearinghouses and 5 central securities depositories supporting equities, options, fixed income, derivatives, commodities, futures and structured products. Able to process more than 1 million    messages per second at sub-55 microsecond average speeds with 99.99% uptime, our technology drives more than 70 marketplaces in 50 developed and emerging countries into the future, powering 1 in 10 of the world’s securities transactions. Our award-winning data products and worldwide indexes are the benchmarks in the financial industry. Home to approximately 3,300 listed companies worth $6 trillion in market cap whose innovations shape our world, we give the ideas of tomorrow access to capital today. Welcome to where the world takes a big leap forward, daily. Welcome to the NASDAQ OMX Century. To learn more, visit www.nasdaqomx.com. Follow us on Facebook (http://www.facebook.com/NASDAQ) and Twitter (http://www.twitter.com/nasdaqomx). (Symbol: NDAQ and member of S&P 500)

About NASDAQ OMX Commodities NASDAQ OMX Commodities is the brand name for the NASDAQ OMX Group’s worldwide suite of commodity related products and services. The NASDAQ OMX Commodities offerings include power, natural gas and carbon emission markets and clearing services. NASDAQ OMX Commodities is a trademark of the NASDAQ OMX Group, Inc.

NASDAQ OMX Commodities Europe is the trade name of NASDAQ OMX Oslo ASA which is authorized as a commodity derivatives exchange by the Norwegian Ministry of Finance and supervised by the Norwegian Financial Supervisory Authority. All trades with NASDAQ OMX Commodities Europe are subject to clearing with NASDAQ OMX Clearing.

NOS Clearing ASA is the leading clearing house for the freight market and a specialist clearing provider to the commodities markets. The company is wholly owned by the NASDAQ OMX Group Inc. The clearinghouse, which is situated in Oslo, has more than 300 members.

NASDAQ OMX Clearing AB 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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