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OTC Clearing Hong Kong Limited Clearing Procedures
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Table of Contents
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| Preface |
| Chapter 1
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Introduction to Clearing Procedures
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| 1.1 |
Interpretation |
| 1.2 |
Amendments |
| 1.3
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Operations of the Rates and FX Clearing Services and Clearing Link Services
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| Chapter 2
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Membership
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| 2.1 |
Membership Application Process |
| 2.2 |
Future Categories of Membership |
| 2.3 |
Clearing Members’ On-going Requirements and Obligations |
| 2.4 |
Client Clearing |
| 2.5 |
Changes to conditions of Membership |
| 2.6 |
Notification |
| 2.7 |
Audit, Inspection or System Tests |
| 2.8 |
Suspension, Termination and Resignation |
| 2.9
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Capped Liability Period
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| Chapter 3
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Rates and FX Clearing Services |
| 3.1 |
Overview |
| 3.2 |
Approved Trade Registration System |
| 3.3 |
Process of Registration and Rejection |
| 3.4 |
Product Eligibility Requirements |
| 3.4A |
Suspension of Products |
| 3.5 |
Error Contract |
| 3.6 |
De-registration |
| 3.6A |
Multilateral Compression
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| 3.7 |
Accounts |
| 3.8 |
Settlement Components |
| 3.9 |
Procedures for Voluntary Deposit of Cash Collateral, porting of Cash Collateral representing Excess Margin and Withdrawal of Cash Collateral representing Excess Margin and Rates and FX Contribution Excess |
| 3.10 |
Types of Securities Acceptable as Non-cash Collateral and Procedures for Voluntary Deposit of Non-Cash Collateral, porting of Non-Cash Collateral representing Excess Margin and Withdrawal of Non-Cash Collateral representing Excess Margin |
| 3.11 |
Cash Settlement Method |
| 3.12 |
Cash Settlement Time |
| 3.13 |
Interest received on Non-Cash Collateral |
| 3.14 |
Maturity of Non-Cash Collateral |
| 3.15 |
Tax |
| 3.16 |
Reporting |
| 3.17 |
Porting of Client Contracts and Collateral to a Transferee Clearing Member |
| 3.18 |
Porting of Contracts and Collateral amongst Client Accounts of a Clearing Member |
| 3.19 |
Notional Exchange Failure Handling Procedures |
| 3.20 |
Mandatory Notional Exchange Risk Limit Reduction Procedures
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| Chapter 4
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Margin and Valuation |
| 4.1 |
Margin Requirement |
| 4.2 |
Initial Margin |
| 4.3 |
Variation Margin |
| 4.4 |
Intra-day Variation Margin |
| 4.5 |
Additional Margin |
| 4.5A |
Participating Margin |
| 4.6 |
Margin Process |
| 4.7
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End-of-Day Valuation and Settlement Process
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| Chapter 5
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Curve Construction |
| 5.1 |
Curve Construction for Rates Derivatives Contracts |
| 5.2
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Curve Construction for FX Derivatives Contracts
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| Chapter 6
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Rates and FX Guarantee Resources |
| 6.1 |
Rates and FX Guarantee Resources |
| 6.2 |
Excess Margin and CM Funded Contribution Amount |
6.2A
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Where the Special Clearing House Participant is the highest Expected Uncollateralized Loss |
| 6.3 |
Stress Test |
| 6.4
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OTC Clear Contribution
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| Chapter 7
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Collateral
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| 7.1 |
Acceptable Collateral |
| 7.2 |
Cash Collateral |
| 7.3 |
Non-cash Collateral |
| 7.4 |
Collateral Concentration Limit |
| 7.5 |
Collateral Valuation |
| 7.6
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Treatment of Collateral
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| Chapter 8
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Default Management |
| 8.1 |
Interpretation and Overview |
| 8.2 |
Member Obligations |
| 8.3 |
Scope and Responsibility of Default Management Group |
| 8.4 |
Suspension of Activities |
| 8.5 |
Hedging (Risk Neutralizing) |
| 8.6 |
Auction |
| 8.7 |
Portfolio Splitting and Re-composition |
| 8.8 |
Cost of Default and Loss Attribution |
| 8.9 |
Post Auction Communication |
| 8.10 |
Review |
| 8.11
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Porting of Affected Contracts and Collateral to a Replacement Clearing Member
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| Chapter 9
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Special Events / Business Continuity
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| 9.1 |
Arrangement for Special Events |
| 9.2 |
Primary Data Center |
| 9.3 |
Service Outage |
| 9.4 |
Special Arrangement for Valuation of a Standard Rates Derivatives Contract which is Denominated in HK$ and a Standard Cross-currency Rates Derivatives Contract which has a Fixed Amount or Floating Amount Denominated in HK$ under Adverse Weather Conditions |
| 9.5
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Special Arrangement of Voluntary Deposit of Cash Collateral, Porting of Excess Margin and Withdrawal of Excess Margin, Excess Participating Margin and Rates and FX Contribution Excess under Adverse Weather Conditions
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| 9.6 |
Special Arrangements of settlement of Initial Exchange Amount and/or Final Exchange Amount of any Standard Cross-currency Rates Derivatives Contract and Notional Amounts of any Deliverable FX Derivatives Contract under Adverse Weather Conditions |
| Chapter 10
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Determination of Close-out Value |
| 10.1 |
Close-out Value |
| 10.2 |
Rates and FX Clearing Termination Event |
| 10.3 |
Emergency Close-Out or OTC Clear Default |
| 10.4 |
Product Suspension Event |
| 10.5 |
Contract Termination Event and Special Clearing House Participant Default |
| Chapter 11 |
Clearing Procedures relating to the Special Clearing House Participant
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11.1
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Obligations of the Special Clearing House Participant
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11.2
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Operation of the Clearing Link Services
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11.3
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De-registration of Inter-CCP Rates Derivatives Contract
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11.4
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Identifier
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11.5
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Settlement
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11.6
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Inter-CCP Margin Amount |
11.7
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Variation Margin
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11.8
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Product specific terms and calculation methodologies
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11.9
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Cash Collateral
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11.10
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Non-cash Collateral
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11.11
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Collateral Valuation
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| Appendix I |
Fee Schedule |
| Appendix II |
Additional Financial Center |
| Appendix III |
Template Hong Kong law Deed of Charge – House Collateral Account |
| Appendix IV |
Template Hong Kong law Deed of Charge – Client Collateral Accounts |
| Appendix V |
Designated Maturities available for Linear Interpolation and for a Stub Calculation Period |
| Appendix VI |
List of Equivalent Floating Rate Options |
| Appendix VII |
Template SSM Tripartite Agreement - sponsoring Clearing Member incorporated in England |
| Appendix VIII |
Template SSM Tripartite Agreement - sponsoring Clearing Member incorporated in France |
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| Glossary
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Glossary |