Rules and Regulations

Clearing

Information on the impact on Clearing, including execution of transactions and bilateral trades, pre-trade checks, indirect clearing and pre-novation.

RTS26 


RTS26 covers some areas which impact clearing and are aimed at providing counterparties with certainty of clearing as soon as possible, i.e. determining at an early stage whether a transaction can be cleared by the CCP.
 

Summary of changes to the Nasdaq Clearing’s services
 
  • “Pending” state for transactions subject to pre-novation is removed - a transaction will be either approved or rejected. If there is insufficient collateral the transaction is rejected. 
  • ”Time-of-agreement” field is added to trade reporting views in Clearing Workstation 1 and Q-port 
  • “Time of agreement” registered in MarkitWire will be passed on to Nasdaq Genium INET 
  • Pre-novation for seafood is removed 
  • 120 min rule for CCP to reject trades is removed. 
  • Clearing requests through email and fax are no longer accepted. 
  • Support for direct debit in connection with intraday margin calls 

Trades executed on a Nasdaq trading venue 

Transactions concluded on Nasdaq Stockholm AB and Nasdaq Oslo ASA are considered to be exempt from pre trade checks since the conditions for the exemption in Article 2.1 (a)-(c) of RTS 26 are met, i.e. Nasdaq Clearing AB (Nasdaq Clearing) will automatically and immediately clear these transactions. 

Trades executed on an external trading venue
 

Nasdaq Clearing clears seafood derivatives traded on the external trading venue Fish Pool. Nasdaq Clearing and Fish Pool are in dialogue regarding whether the conditions for the pre trade check exemption in Article 2.1 (a)-(c) of RTS 26 can be met or if Fish Pool will apply pre trade checks in accordance with Article 2.2-2.4 of RTS 26.
 

Bilateral transactions not subject to pre-novation 

Transactions concluded on a bilateral basis shall be reported by the counterparties to Nasdaq Clearing within 30 minutes from the conclusion of the transaction. The transaction is automatically deemed to have been accepted for clearing when the transaction has reached the CCP’s clearing system. 

Bilateral transactions subject to pre-novation 


Products subject to clearing broker affirmation and pre-novation:
Interest Rate Swaps, Overnight Interest Swaps and TM-Forward Rate Agreements are subject to clearing broker affirmation and pre-novation, which is done before the actual novation of the transaction. The counterparties shall report the bilateral transaction to Nasdaq Clearing within 30 minutes from the conclusion of the transaction. Nasdaq Clearing will notify the clearing member within 60 seconds from receipt of the transaction. The clearing member then has 60 seconds to accept or reject (affirm) the transaction. Once the transaction is affirmed by the clearing member, Nasdaq Clearing will validate that the considered clearing accounts have sufficient collateral (pre-novation). Based on the result from the pre-novation collateral check, Nasdaq Clearing will accept or reject the transaction within 10 seconds. A transaction where the clearing account does not have sufficient collateral will be rejected. 

In order to help clearing members to comply with the 30 min deadline MarkitWire and Nasdaq´s Genium INET system will be enriched with a “time of agreement” value.


Pre-novation for Seafood removed 

Nasdaq Clearing clears Seafood derivatives traded on the external trading venue Fish Pool. The current pre-novation check for Seafood transactions will be removed.
 

120 min rule for CCP to reject trades removed. 

Currently transactions can be rejected 120 minutes after a transaction has been registered for clearing. This deadline will be removed and replaced with “immediately” or “10 seconds”, depending on whether the transaction was concluded on a trading venue or as a bilateral transaction.
 

Clearing requests through e-mail and fax removed. 

As a consequence of RTS 26, Nasdaq Clearing will no longer be able to support clearing requests through e-mail and fax.
 

Support for direct debit in connection with intraday margin calls
 

Nasdaq Clearing is enhancing the Genium INET system and will offer a direct debit service in connection with intra-day margin calls. The use of direct debit in connection with intra-day margin calls is optional for clearing members.
 

Timeline 

The “pending” state for transaction subject to pre-novation will be removed by 3 January 2018. The other changes will take effect in connection with Nasdaq´s system release in November 2017.


RTS – Indirect Clearing


Indirect Clearing deals with the protection of clients further down the clearing chain, i.e. clients that have a contractual relationship with a client of a clearing member which enables the first client to clear its transactions with a CCP. Both EMIR and MiFID include provisions around Indirect Clearing and ESMA is working to develop Regulatory Technical Standards (RTS) that are aligned between the two regulations.

See Nasdaq Clearing's response to the latest consultation on Indirect Clearing >

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