According to EMIR Article 39, each Central Counterparty (CCP) and each Clearing Member (CM) must offer at least two different types of models for segregating positions and collaterals: First, omnibus segregation (EMIR Article 39(2)) where positions and assets of a group of clients can be recorded jointly in position accounts and collateral accounts, and are thus held separately from the proprietary assets of the CM. Second, individual segregation (EMIR Article 39(3)) where positions and assets of a single client are recorded in position accounts and collateral accounts respectively, and are thus held separately from all other clients of that CM.. Such individual segregation protects the clients’ assets against losses resulting from other clients’ or CM’s positions, and therefore fully removes fellow client risk.
ECC offers such model types in compliance with the EMIR requirements.
By default, the proprietary collateral of the CM is separated from the general omnibus collateral (GOS) on a by value basis via the Standard Collateral Clearing Account. The CM has the option to set up a separate collateral clearing account for its proprietary collateral to achieve strict by asset segregation.
All further segregated accounts can be opted for by the CM and – in some cases – together with its NCM according to the benefits desired.
- Individually segregated NCMs benefit from full protection of their positions and assets. In case of a CM Default event, ECC will immediately trigger the process for transferring positions and segregated collateral to a new CM specified by the Non-Clearing Member (NCM). The new CM must accept the transfer. If no CM accepts the transfer, positions are liquidated and balance owed is returned to the NCM.
- Omnibus clients which are undisclosed agency clients but can also be NCMs may choose between different types of omnibus segregation to protect their positions and assets.
The set-up of Simple Omnibus Collateral Clearing Account (SOS) and Omnibus Segregated Accounts (OSA) has to be requested by the Clearing Member. For Individual Segregation both the NCM and the CM have to contractually agree with the CCP into the setup.