IRC Clearing PDF

IRC Clearing ------------ ### Clearing JSE Clear will perform the clearing and ensure the performance of -- - trades in derivative securities executed on the central order book of the JSE trading system; and - off book transactions in derivative securities reported to and matched by...

IRC Clearing ------------ ### Clearing JSE Clear will perform the clearing and ensure the performance of -- - trades in derivative securities executed on the central order book of the JSE trading system; and - off book transactions in derivative securities reported to and matched by the JSE trading system. Upon the transaction being cleared, JSE Clear will replace the buyer and become the counterparty to the seller, and it will replace the seller and become the counterparty to the buyer. ### Opening and closing-out a position - When there is no position in a futures or option contract prior to a transaction in the futures or option contract being cleared, a position in the futures or option contract shall be opened and registered with JSE Clear in the name of the trading member or its client when the transaction is cleared. - The futures or option contracts comprising a transaction which has been cleared, shall be added to or off-set against an existing position registered in the name of the party concerned and the position shall be increased, decreased, closed out or a position in the opposite direction shall be opened, as the case may be. - On the expiry of an option contract of which the strike price is not better by a certain amount determined by the JSE, as set out in the directives, than the expiry price of the underlying instrument of the option contract -- - the person in whose name a long position in the option contract is registered by JSE Clear shall be deemed to have sold the number of the futures contracts equal to the number comprising the position, to JSE Clear; and - the person in whose name a short position in the option contract is registered by JSE Clear shall be deemed to have bought a number of the futures contracts equal to the number comprising the position, from JSE Clear. - The price of the futures contract which shall apply to the sale and the purchase shall be the expiry price determined in the manner prescribed in the contract specification of the futures contract in question and the price of an option contract which shall apply to such purchase or sale shall be zero. - Clearing rules shall apply ipso facto to the futures or option contracts comprising the purchases and sales. - Where the strike price of an option contract is, on expiry, better by a certain amount determined by JSE Clear, as set out in the directives, than the expiry price of the futures contract underlying the option contract, the person in whose name a position in the futures or option contract is registered shall be deemed to have exercised the option contract. - On the expiry of a physically settled futures contract and on instruction from the Market Controller, the holder of a long position in the futures contract shall, through the JSE trading system, report a purchase of the underlying bonds and the holder of a short position shall, through the JSE trading system, report a sale of the underlying bonds at the price equal to that referred to in rule 8.30.4 (Opening and closing-out a position) and the purchase, sale, delivery and receipt of the underlying bonds shall take place in accordance with IRC settlements Rules. ### Mark-to-market At 17h30 on each business day, or such other time as JSE Clear may determine on a particular business day, the positions in each IRC security of all trading members and their clients will be marked- to-market on such basis as JSE Clear may determine. JSE Clear may at any time on any business day mark-to-market the position in any IRC security of any trading member or client if, in its sole discretion, the conditions in the IRC markets for the security or its underlying instrument warrants such additional mark-to-market. ### Margin payments Initial margin Initial margin shall be paid to or by a trading member or client whenever the risk of loss, as determined by JSE Clear, changes with respect to the aggregate position of such trading member or client. Initial margin shall be paid in cash and/or may be posted by pledging securities to JSE Clear in accordance with section 39 of the Financial Markets Act, subject to the rules, policies, and procedures of JSE Clear. Pledged securities may be substituted by the pledge of other qualifying securities in accordance with the rules, policies, and procedures of JSE Clear. JSE Clear may at any time and forthwith call for payment of cash from market participants that have pledged securities and/or have withdrawn and/or substituted securities pledged in terms of the JSE Clear Rules, to ensure that they comply with their initial margin obligations. Variation margin Variation margin shall be paid to or by a trading member or client in whose name a position in a futures or option contract is registered as the result of the marking-to-market of a position or the closing out of a position or part thereof or the closing out of a position. Additional margin - A clearing member may, in terms of the JSE Clear rules, require a trading member with whom it has entered into a clearing agreement to deposit with it, with respect to the proprietary position of the trading member or the position of any of the clients of the trading member, an amount of additional margin as agreed upon between the parties in terms of the clearing agreement. 35 - A trading member may require a resident client to deposit with it, with respect to the resident client\'s position, an amount of additional margin as agreed upon between the parties in terms of the client agreement. Retained margin A trading member, with respect to a resident client, may with the client\'s prior written agreement - - require the client to deposit an amount of money with such trading member to be used to furnish initial margin or additional margin before the trading member shall trade with the client; and/or - retain initial margin or variation margin payable to the client, or interest accruing, in anticipation of future transactions provided that the money so deposited or retained shall be repaid to the client if the client has not traded with the trading member within thirty days. Maintenance margin level A trading member may agree, where a client has additional margin deposited with such trading member, that the client shall pay an amount of money to restore the additional margin when the additional margin has been used to meet payments of variation margin. Interest payments - JSE Clear will manage and invest all margins held by it in terms of the JSE Clear rules and it will no later than the second day of the month following the month in which interest was received or accrued, remit such interest, net of the interest consideration to each clearing member in relation to the margin held in respect of the positions of the clearing member, its clients and trading members and the clients of such trading members for the previous month. - Monthly in arrears a clearing member may remit the interest received in terms of the JSE Clear rules to the trading members with whom it has entered into clearing agreements in relation to the positions of the trading member and their clients. - Monthly in arrears a trading member may remit the interest received, or any part thereof, to its clients in relation to the positions of such clients at any time during the preceding month. Trading, Clearing and Settlement Fees With the exception of transactions in bonds, the JSE shall levy trading fees on a clearing member in respect of the trades of the clearing member, its clients, and the trading members with whom the clearing member has entered into clearing agreements, in an amount and in a manner as decided by the JSE Executive, and such fees may be recovered from the clearing member on behalf of the JSE by JSE Clear. A trading member may levy such fees and charges for different categories of transactions as it deems fit on clients with whom it trades: Provided that such fees and charges shall be in accordance with the schedule of fees and charges which shall form part of the client agreement. A trading member shall not levy a fee or any other charge on a client in respect of a transaction in terms of which it has traded as a principal with the client without the prior written agreement of the client having been recorded in the client agreement. With regards to transactions in bonds, the JSE shall levy trading fees on a trading member in respect of trades of the trading member and its clients, in an amount and in a manner determined by the JSE Executive. Payment procedures With respect to its proprietary positions, the positions of its clients, the positions of the trading members with whom it has entered into clearing agreements and the positions of the clients of such trading members, the clearing member will, in terms of the JSE Clear rules, pay to or receive from JSE Clear the net amount of -- - in respect of non-resident clients, the sum of the initial margin; - the variation margin; and - the trading, clearing and settlement fees for transactions in interest rate and currency derivatives. An amount due from a clearing member in terms of JSE Clear rule 5.7.1 (Settlement procedures) will be paid to JSE Clear not later than 10h00 on the business day following the day on which such payment accrued or such other time as JSE Clear may in its sole discretion determine With respect to any proprietary position, the position of any of its clients, the position of a trading member with whom it has entered into a clearing agreement and the position of a client of such trading member which JSE Clear has marked-to-market, the clearing member will, in terms of the JSE Clear rules, pay to JSE Clear the amount of variation margin at the time stipulated by JSE Clear when the clearing member is notified by it of the mark-to-market. With respect to the positions of its clients as a trading member, the positions of any other trading members with whom it has entered into a clearing agreement and the positions of the clients of such trading members, the clearing member is acting as a settlement agent on behalf of those parties in relation to any amounts paid to or received from JSE Clear in terms of JSE Clear (Settlement procedures) With respect to its proprietary positions and the positions of its clients, a trading member shall pay to or receive from the clearing member the net amount of -- - in respect of non-resident clients, the initial margin; - the additional margin; - the variation margin; and - the trading, clearing and settlement fees for transactions in interest rate and currency derivatives. An amount due to or from a clearing member shall be paid by such time as the trading member and the clearing member have specifically agreed upon with respect to a particular payment, provided that any payment due to a clearing member is made at a time which enables the clearing member to pay the amount due to the clearing house by no later than 10:00 on the business day following the day on which such payment accrued. With respect to any proprietary position or the position of any of its clients, which JSE Clear has marked-to-market, the trading member shall pay to the clearing member the amount of variation margin by the time, as stipulated by JSE Clear, and as notified to the trading member by the clearing member. In respect of non-resident clients, with respect to his positions a client shall pay to or receive from the trading member with whom he traded to open such positions the net amount of -- - the total of the initial margin for all his aggregate positions: Provided that any amount so due from the resident client shall be off set against any retained margin; - the additional margin referred; - the variation margin; and - the trading, clearing and settlement fees for transactions in interest rate and currency derivatives. An amount due to or from a trading member shall be paid by such time as the trading member and the client have specifically agreed upon with respect to a particular payment, provided that any payment due to an exchange member is made at a time that enables the exchange member to pay the amount due to the clearing member and ultimately enables the clearing member to pay the amount due to the clearing house by no later than 10:00 on the business day following the day on which such payment accrued. With respect to the position of any client, which JSE Clear has marked-to-market in terms of JSE Clear, the client shall pay to the trading member the amount of variation margin by the time stipulated by JSE Clear Rules and notified to the client by the trading member. ### Exercise and Assignment of Option Contracts Exercise - A client in whose name a long position in an option contract is registered with JSE Clear may exercise the option on the expiry date up to the expiry time of the option contract by either verbal or written notice to the trading member with whom he dealt in order to open the long position. - A trading member who has a proprietary long position in an option contract registered in its name with JSE Clear may exercise the option on the expiry date up to the expiry time of the option contract, and shall exercise such options, or options registered in the name of a client which are exercised on the instruction of the client, by executing the exercise on the JSE trading system in the manner prescribed by the JSE or as set out in the directives. Upon the exercise of an option, the person in whose name the long position in the option contract was registered with JSE Clear shall be deemed to have bought or sold the underlying instrument of the option contract in question at the strike price from or to JSE Clear. Assignment When an option is exercised or when an option is deemed to have been exercised, JSE Clear will, in terms of the JSE Clear rules, exercise its option to buy or sell the underlying instrument in question to or from the holder of a short position in the option contract in question provided that -- - JSE Clear will in its sole discretion assign the exercise of the option contract or contracts to the registered holders of short positions in the option contract; - and the person to whom the exercise of the option contract is assigned shall be deemed to have bought or sold the underlying instrument of the option contract.