Cash Equity CCP Oslo Clearing Oslo Clearing
Agenda Agenda � Value proposition � Participants and roles � Account structure � P Post trade processing t t d i � Risk management � � Time schedule and communication Time schedule and communication 2
Value proposition 3
Oslo Clearing – Value Proposition Oslo Clearing Value Proposition � Efficient integration with existing infrastructure � Optimal netting and settlement efficiency p g y � Efficient integration and utilisation of existing infrastructure � High degree of standardisation / harmonisation � Flexible account structure � Oslo Clearing CCP offer includes � All stocks, equity certificates and ETFs quoted on Oslo Børs � Voluntary clearing of all off ‐ exchange matched trades in order to � � obtain higher degree of netting and reduced counterpart risk obtain higher degree of netting and reduced counterpart risk � Competitive pricing � Customer choice “Price model” � Price model(s) adapted to new trading patterns ( ) p g p � No hidden cost for collateral management � Lending schemes ,penalties etc. priced on “at cost basis” � Lean and flexible organisation structure allows low cost base 4
Oslo Clearing – Value Proposition Oslo Clearing Value Proposition � Margining model � VaR portfolio model – taking both volatility and correlation p g y into account � Netting between underlying collateral and Equity transactions � “Real time” Risk management � “Real time” web ‐ solution for clearing members � Risk management feed to proprietary systems � A state of the art collateral management solution � Several cash collateral agents � Tri ‐ party ICSD collateral management services for international fixed income instruments � Norwegian equities, primary capital certificates, ETFs and fixed income instrument held on pledged VPS accounts 5
Participants and roles 6
Markets and instruments Markets and instruments Oslo Børs Market place Market place member member Oslo A ess Oslo Axess Oslo Clearing � Oslo Børs and Oslo Axess (Exchanges) are the primary markets for securities cleared through Oslo Clearing. Instruments eligible for clearing: � cash equities � Primary capital certificates � Exchange traded funds � Pursuant to the exchanges rules clearing will be mandatory for all trades matched in the Pursuant to the exchanges rules clearing will be mandatory for all trades matched in the trading systems of the exchanges � Trades concluded outside the trading system of the exchanges may be cleared upon request by both parties of the initial trade. 7
Clearing participants Oslo Børs Market place Market place member member Oslo Axess Oslo Clearing Clearing member Clearing member � A market place member of Oslo Børs must either be a direct member of Oslo Clearing or appoint a general clearer which will be responsible of clearing of trades on behalf of the market place member p � Institutions that fulfils the membership criteria’s of Oslo Clearing may become either; � Direct Clearing Member (DCM) ‐ responsible of all trades concluded by him selves on house or client accounts, or; � � General Clearing Member (GCM) responsible of all trades concluded by him selves General Clearing Member (GCM) ‐ responsible of all trades concluded by him selves on house or client accounts and trades concluded by other market place members on house or client accounts. The latter referred to as Non Clearing Member (NCM) 8
Settlement participants Settlement participants Oslo Børs Market place Market place member member Oslo Axess Oslo Clearing Clearing member Clearing member Settlement Settlement VPO member member Norges Bank Liquidity provider Liquidity provider Liquidity provider Liquidity provider Central bank of Norway � All securities listed on the Exchanges and cleared through Oslo Clearing are settled through the central securities settlement system (VPO) � A clearing member may either be a settlement member of VPO itself or appoint one or several settlement agents willing to perform the settlement of all cleared trades on behalf of the clearing member. 9
Liquidity providers Liquidity providers Oslo Børs Market place Market place member member Oslo Axess Clearing member Oslo Clearing Clearing member Settlement Settlement VPO member member Norges Bank Liquidity provider q y p Liquidity provider q y p Central bank of Norway C l b k f N � All settlement members must have access to a cash settlement account for VPO cash settlements taking place in the central bank of Norway (Norges Bank) � � A settlement member may either: A settlement member may either: � If the settlement member is a bank, set up a cash settlement account in Norges Bank and provide the liquidity required for VPO cash settlements him selves, or; � Appoint a liquidity provider willing to settle on behalf of the Settlement member through the liquidity providers settlement account in Norges Bank. h li idi id l i N B k 10
Account structure 11
Flexible Account Structure Flexible Account Structure VPO Trade account-1 Clearing account-1 Margin account-1 Collateral account-1 house settlement account Service account-2 VPO Trade account-2 Clearing account-2 Margin house settlement account Service account-3 Trade account-3 Margin Margin VPO Trade account-4 Clearing account-4 Margin account-4 Collateral account-4 house settlement account Clearing members will be given the option to setup its own distinct system of accounts, for the purpose of generating settlement instructions, margin requirements and reporting as preferred by the clearing member and in accordance with the clearing member’s business model. This includes the option to setup includes the option to setup: � Segregate house and client accounts � Segregate NCM chart of accounts � Separate Service accounts for reporting purposes only p p g p p y 12
Post trade processing 13
Transaction Processing Transaction Processing Oslo Børs Order Order Market place p Market place p execution execution member member Oslo Axess Trade Capture Trade validation Clearing Clearing Oslo Clearing Clearing member Clearing member confirm ation confirm ation Netting Netting Settlem ent I nstruction Settlement Settlement Settlem ent Settlem ent VPO member member I nstruction I nstruction Norges Bank Liquidity provider Liquidity provider Central bank of Norway 14
Transaction processing Transaction processing Trade capture All trades matched within the trading system of Oslo Stock Exchange or Oslo Axess will be reported to the clearing system real time by the exchange trading system. Trade validation All trades received by Oslo Clearing will be subject to a validation procedure prior to registration in the clearing system. The validation procedure verify: • If both deal counterparties have a valid clearing membership p g p • If the financial instrument is approved by Oslo clearing If the required fundamental trade data is in place • Each trade rejected by the validation procedure will be reported immediately to the exchange. The report will include any discrepancies being the reason for rejection. y p g j Trade & clearing confirmation Oslo Clearing will distribute a clearing confirmation for all trades registered in the clearing system on • gross basis. • Th The clearing confirmation may be distributed to both: l i fi ti b di t ib t d t b th – Direct clearing members, – General clearing members and; – Non clearing members and/or settlement agents upon request by a GCM or DCM . t b GCM DCM 15
Generation of settlement instruction Generation of settlement instruction Netting • Oslo Clearing will aggregate and net all trades registered in the clearing system each day by ISIN, Settlement Date and Settlement Account in accordance with the system of accounts specified by the S ttl t D t d S ttl t A t i d ith th t f t ifi d b th individual clearing member. • If the netting procedure results in a ”strange net” (transfer of securities and cash in the same direction or cash settlement only), Oslo Clearing will aggregate sell and buy side separately and generate two net settlement transactions (”clean net”) settlement transactions ( clean net ) DvP and RvP settlement instructions due to aggregation of buy and sell side separately will be linked • together when transmitted to the central securities settlement system by Oslo Clearing. Settlement Instructions Net settlement instruction will be sent VPO within CET 19:00 at the end of each day Net settlement instruction will be sent VPO within CET 19:00 at the end of each day • • • Settlement instructions transmitted and matched on at the end of each day (registration day) will not be opened and/or changed during the settlement period • Cancelations, corrections or new transactions in the same ISIN on the same Settlement Account with same settlement date will lead to the creation of new settlement instructions (contra trades) settlement date will lead to the creation of new settlement instructions (contra trades) 16
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