MERIDIAN CLEARING
Division 22 / Market Infrastructure//2201.MB清算

Membership is open. Capital is not.

Three participation categories, initial margin at 99.7 per cent over a two-day close-out, and prefunded default resources of 1,400,000,000. Admission in six weeks from a complete application.

The clearing house acts as central counterparty to every transaction registered on the venue. On registration it interposes itself between the two sides of the transfer by novation, becoming buyer to every seller and seller to every buyer. Membership is the mechanism by which that interposition is financed.

Access is non-discriminatory, as required of a central counterparty. Applicants are assessed on regulatory capital, operational capability and default management readiness, and on nothing else.

Categories

Category Net capital required Clears for Admission fee Annual
General Clearing Member 250,000,000 Own account and clients 750,000 340,000
Direct Clearing Member 50,000,000 Own account only 750,000 95,000
Sponsored Participant 10,000,000 Own account, through a sponsoring General Clearing Member Nil Nil
Current membership   62 General, 148 Direct, 1,206 Sponsored    

A Sponsored Participant does not face the clearing house. It faces its sponsor, and the sponsor faces us. The sponsor is liable to the clearing house for its sponsored participants in full, without netting and without limit. Sponsors are compensated for that exposure by their sponsored participants, on bilateral terms which the clearing house neither sees nor regulates.

Retail access is not offered in any category. A retail participant would hold a position to maturity, and a position held to maturity introduces settlement risk into a market whose margin model does not price it.

Margin

  • Initial margin is calculated at 99.7 per cent confidence over a two day close-out period, by full revaluation across 1,250 historical and 250 stressed scenarios. It is held in central bank money or in sovereign collateral at a haircut set by the clearing house and published in the parameter file.
  • Variation margin is called and paid in cash daily, and intraday at 09:00, 12:00 and 15:00 CET.
  • A call must be met within 60 minutes of issue. Failure to meet a call within 60 minutes is a Default Event under the rulebook. No cure period and no materiality threshold apply.
  • Position limits: none. A member may accumulate any position its margin supports. Margin is recalculated three times a day, so the constraint is always current.
  • Concentration add-ons apply where a member’s position in a single instrument exceeds 15 per cent of open interest. The add-on schedule is published in the parameter file and is not negotiated.

The default waterfall

Resources are applied in the following order. Each layer is exhausted before the next is touched. The sequence is the standard sequence for a central counterparty and has not been varied.

Order Layer Source Amount
1 Defaulter’s initial margin The defaulting member Position dependent
2 Defaulter’s default fund contribution The defaulting member Position dependent
3 Dedicated own resources The clearing house 14,000,000
4 Base contributions, General Clearing Members 62 members at 5,000,000 310,000,000
4 Base contributions, Direct Clearing Members 148 members at 1,250,000 185,000,000
4 Risk-proportional contributions Allocated pro rata to 60 day average initial margin 891,000,000
  Total prefunded resources   1,400,000,000
  Dedicated own resources as a share of the total 14,000,000 of 1,400,000,000 1.0 per cent
  Member contributions as a share of the total 1,386,000,000 of 1,400,000,000 99.0 per cent
5 Assessment powers Non-defaulting members, up to 2 times contribution per call, maximum 2 calls See below
6 Variation margin gains haircutting Members in credit on the cycle, pro rata, capped at gains accrued Recovery tool
7 Partial tear-up Contracts terminated at the last settlement price Recovery tool

Dedicated own resources are calibrated to the clearing house’s own operational and business risk in accordance with the applicable capital requirement, and are committed ahead of the non-defaulting membership at layer three. The clearing house holds no proprietary position in any listed instrument at any time and accordingly contributes no position-proportional element to the fund.

Assessment exposure, worked

Reference General Clearing Member with a default fund contribution of 22,400,000, being a base of 5,000,000 and a risk-proportional element of 17,400,000.

Item Basis Amount
Contribution at risk in layer 4 Standing contribution 22,400,000
First assessment call 2 times contribution 44,800,000
Second assessment call 2 times contribution, after a 30 day cooling-off period 44,800,000
Maximum exposure, one default event Contribution plus both calls 112,000,000
As a multiple of the standing contribution 112,000,000 divided by 22,400,000 5.0 times
Contribution as a share of the required 250,000,000 net capital 22,400,000 of 250,000,000 8.96 per cent
Maximum exposure as a share of that net capital 112,000,000 of 250,000,000 44.8 per cent

Assessment is capped, which is the material protection for a surviving member. Layers six and seven form part of the clearing house’s published recovery plan and are not capped by amount.

Standing obligations

  • Position limits: none. Disclosure of the conduct underlying an obligation to holders: not required. Disclosure to the party the conduct concerns: not contemplated. These are rulebook provisions and are not waivable by agreement between members.
  • Members maintain the capital requirement continuously and certify it monthly. A member falling below the requirement may reduce open positions and may not increase them.
  • Settlement assistance for a member holding at maturity is available separately, at rates published in the Settlement Defence schedule.
  • Referral to the group’s executive search division, for the appointment of a designated officer where personal exposure at settlement is unavoidable, is included in membership at every category including Sponsored Participant.
  • Membership continues during proceedings arising from settlement, subject to Rule 3.5.1 and to continued compliance with the capital requirement.