Trading Limit Management
For the Direct Clearing Model, pre-collateralized trading limits are set with the exchange for each market. Direct Clearing Participant Clearing Member (DCP CM) can execute trades as long as their exposure stays below the collateralized trading limits.
The trading limit of a DCP CM is derived from the collateral amount the DCP CM posts with ECC. Twice a business day, the exact outstanding risk exposure will be determined and taken from the collateral position. The remainder becomes available for the trading limit distribution. This so-called “Dynamic Limit” gives DCP CM’s a high degree of trading flexibility, making most of the posted collateral available for trading.
A DCP CM communicates the limit distribution preferences and (optional) base-limit , by submitting the form “O09 Limit Adjustment”.
For submitting the form as well as for support concerning the limit management process, please contact ECC Direct Clearing Team on the following email address: firstname.lastname@example.org.
The DCP CM can see the trading limit set for each market in the ECC Member Area.
To collateralize the trading limits, DCP CM´s can deposit collateral with ECC as defined in the clearing conditions.
Currently accepted collaterals for DCP CM´s are:
- Cash funds in EUR and GBP
- Bank Guarantee in EUR and GBP (by ECC approved guarantors and using ECC approved bank guarantee wording template for DCP CM. For further information please refer to Bank Guarantees as Collateral)
All collaterals for a DCP CM are booked in a delivery account in ECC’s settlement system SMSS. For each margin type and currency, a separate delivery account is set up. The member can monitor the balance of his collateral accounts via ECC’s Member Area.
|SMSS Collateral Management||Description|
|HLDNG_CASH_MRGN_EUR||Cash deposited at ECC in the collateral account and in currency Euro.|
|HLDNG_CASH_FUND_EUR||Cash deposited at ECC in the clearing fund account and in currency Euro.|
|HLDNG_CASH_MRGN_GBP||Cash deposited at ECC in the collateral account and in currency British Pound.|
|HLDNG_CASH_FUND_GBP||Cash deposited at ECC in the clearing fund account and in currency British Pound.|
|HLDNG_CASH_CAP_EUR||Credit limit given in currency Euro determining the total trading limit.|
|GUARANTEE_XXXX_EUR_DMS||Guarantee provided from an accepted guarantor – guarantee amount will be booked at the collateral account in Euro.|
|GUARANTEE_XXXX_GBP_DMS||Guarantee provided from an accepted guarantor – guarantee amount will be booked at the collateral account in British Pound.|
Cash Collateral payments resulting from adjustments of collateral are shown in ECC’s payment reports and will be settled according to the financial settlement process for DCP CM’s.
Any increase of collaterals provided before 14:00 CET, will be considered the next business day at 16:00 CET.
Any decrease of collaterals provided before 12:00 CET will affect the trade limit as of 16:00 CET, while payout is released 3 business days later.
A DCP CM communicates these collateral preferences, by submitting the form “O10 Cash Deposit and Release”. For submitting the form as well as for support concerning the collateral management process, please contact ECC Direct Clearing Team on the following email address: email@example.com.
The maximum collateral value (CAP) that a DCP CM can post with ECC is capped by the financial strength of the DCP CM. ECC uses the Creditreform rating and equity of the DCP CM to determine the maximum collateral value (CAP) as shown in the following table:
|Creditreform Score||Equity* (in thousand EUR)||Maximum Collateral (in million EUR)|
|100 ≤ x ≤ 149||> 50,000||25|
|150 ≤ x ≤ 199||10,000 – 50,000||20|
|200 ≤ x ≤ 249||5,000 – 10,000||15|
|250 ≤ x ≤ 299||2,000 – 5,000||10|
|300 ≤ x ≤ 349||1,000 – 2,000||5|
|350 ≤ x ≤ 499||200 – 1,000||2|
|>500||50 - 200||1|
*) Equity incl. subscribed capital, capital reserves, retained income less any losses incurred in the course of the year and less intangible assets. Increases of the subscribed capital during a given year shall be proven by means of the submission of the registration message. A DCP CM can increase the equity by means of bank guarantees or guarantees of a parent company accepted by ECC.
DCP CM’s are required to contribute to the ECC clearing fund according to section 3.7 of the ECC Clearing Conditions. Accepted contribution for the ECC clearing fund is Euro & British Pound cash only. In case of a DCP CM’s default, its collateral and clearing fund contribution are used to cover the resulting shortfall. If that is not sufficient, ECC’s dedicated own resources of currently 15 million EUR and subsequently the default fund contribution of all other DCP CM’s are used. Finally, the remaining clearing fund is used.
A minimum default fund contribution of a DCP CM is defined as a percentage of its total trading limit.
ECC performs daily stress tests. If the calculated shortfall from the stress test exceeds the DCP CM’s clearing fund contribution including ECC’s dedicated own resources, the amount of exceedance is allocated to the DCP CM as an additional clearing fund contribution proportional to their current shortfall.