Workshop for Balkan Gas Hub trading members
KELER CCP_BalkanGasHub_1stIntroductory workshop_20250206.pdf
When did KELER CCP and the Balkan Gas Hub (BGH) signed the agreement?
The strategic partnership between BGH and KELER CCP has started by signing an agreement on the 26th of June, 2024. KELER CCP and BGH has declared, that they will introduce central clearing services for clients trading on BGH’s natural gas markets.
What was the demand on the market to launch central counterparty (CCP) and clearing services?
Currently market participants in Bulgaria have no clearing and settlement and related risk management solutions for exchange-based natural gas tradings. There was a demand to minimize counterparty and market risk by introducing a post-trading environment, bringing an advantage for BGH using central counterparty and clearing services as well.
What benefits will it bring to the market?
Bulgarian market participants will have access to the most advanced clearing and risk management services. KELER CCP is one of the fastest growing central counterparties in the Central-Eastern European region. Services will be based on extensive know-how of European best practices and fully adapted to the Bulgarian market needs.
What are the advantages for a trader company in Bulgaria?
Non-discriminatory and anonymous trading, standardized products and procedures, guarantee undertaking of the financial settlement.
In what other countries is KELER CCP present currently?
KELER CCP provides central clearing services for the Hungarian securities and derivatives capital markets dating back to 1994 through its parent company, and since 2009 as an independent clearing house. Besides capital market clearing activity, KELER CCP provides central clearing for the Hungarian natural gas balancing market since 2010 and provides clearing for the organized gas market since its launch in 2013 and also for the derivatives gas exchange since 2018. KELER CCP is also an acting general clearing member and provides services on many different energy exchanges under the umbrella of ECC, the German energy central counterparty. Number of clearing members was 188 at the end of 2024, and there are clearing members and non-clearing members from more than 20 countries.
When will the central counterparty and clearing service be launched?
As soon as all the procedures and IT developments will be finalized in cooperation with BGH and client on-boarding is successfully completed. This shall happen in the mid of 2025 according to the plans.
How the trading calendar was created?
By creating the trading calendar KELER CCP and BGH needed to take into consideration the national holidays in both countries. Trading calendar has been set based on the Hungarian Holiday calendar. KELER CCP will provide clearing services on all official Bulgarian business days which correspond to Hungarian business days and on which the Settlement Bank provides settlement services. On Bulgarian business days which correspond to Hungarian holidays, KELER CCP will not provide clearing services.
The two countries belong to different time zones, resulting 1 hour difference in between. Does it affect the trading in Bulgaria?
BGH operates its markets in line with the Trading Rules, which are part of its Rulebook. Spot market is available on a 365/7/24 basis, while Futures (Forward) market trading is available only on business days in accordance with the harmonized clearing calendar. Hungarian Time is the Central European Time Zone, Bulgarian Time is CET+1:00. The time difference does not cause disadvantages in any of the countries.
What will be the governing law?
KELER CCP provides its services under the Hungarian law, therefore the prevailing law is the Hungarian. As a result, all applicable rules and procedures, as well the contracts concluded between KELER CCP and the clearing participants will be also under the Hungarian law.
BGH is subject to Bulgarian law as regards the operation of the organized market. Agreements between BGH and trading members will be subject to Bulgarian law.
How to access clearing services of KELER CCP?
Under the clearing membership system established by KELER CCP, all the Trading Participants having direct market access (i.e. direct market participants) shall become a direct clearing participant, respectively a Clearing Member of KELER CCP.
What are the requirements set for becoming a Clearing Member?
In order to take part in the clearing services, the partners must become Clearing Members. For this, according to the industry standards the following requirements have to be met:
• 75mn HUF equivalent shareholders equity (Total Equity line in the balance sheet)
• providing an audited financial report
• completion of the Know Your Customer Questionnaire
• opening and maintaining a settlement bank account at one of the designated Settlement Bank partners of KELER CCP
• no sanctions involvement
• no KO criteria are met
How will the clearing process work?
The process itself is based on KELER CCP’s more than two decades of experience.
Spot transactions:
Buy/sell orders shall be submitted by the Trading Participants in the Trading System operated by BGH. The Trading System executes financial based pre-trade limit checking of the buy orders, followed by the matching of the orders by the Matching Engine of the Trading System. Buy orders shall be matched if only they are not breaching the financial limit.
Matched trades are sent by BGH to KELER CCP in a batch-file at the end of the business day as an integrated part of the end of day procedure. Cleared trades are subject of novation and guarantee undertaking from the time of confirmation, e.g. receipt and confirmation of batch-file. Technical trade day closing hour is 18:00 CET. Batch file contains all previously not cleared trades executed between T-1 18:00:00 CET and T 17:59:99 CET.
Futures transactions:
Matched orders (e.g. trades) are sent by BGH to KELER CCP for novation on a real-time basis. Trades accepted for clearing (cleared trades) shall be confirmed towards BGH by KELER CCP and the Clearing Members by BGH after the novation of the trades. Cleared trades are subject of novation and guarantee undertaking from the time of confirmation.
The Clearing System continuously calculates the positions of the respective positions accounts as an integrated part of clearing.
Based on the end of day clearing process, KELER CCP calculates the variation margin (VM) and initial margin requirements in line with the applicable segregation rules and sends instructions (credit/debit) to the Settlement bank for execution including VM settlement and collection of collaterals respectively.
When will the financial settlement take place?
At the end-of-day clearing process KELER CCP calculates the net positions (net seller or net buyer) as well as the collateral requirements of every Clearing Member and informs them about the result through the clearing reports in detail (around 7 p.m. CET). Clearing Members are obliged to fulfill their financial obligations (net financial obligation, collateral/margin requirements) no later than beginning of the next business day on T+1 day 8:50 a.m. CET) on their respective cash account held with the Settlement Bank.
What will be the settlement currency?
Spot and futures (forward) contracts listed and offered for trading by BGH and subject to central clearing will be traded in Euro (ISO: EUR), consequently, related clearing and settlement will be executed in Euro (EUR) as well.
What will be the settlement cycle?
BGH trades will be cleared and settled in one settlement cycle on a T+1 basis, where financial settlement will be mingled/netted with all other gas markets already cleared and settled by KELER CCP (as of today CEEGEX, HUDEX, Trading platform operated by FGSZ Zrt.).
How the invoicing procedure will look like?
KELER CCP provides with self-billing invoicing regime, where purchase and sale invoices of the sold/bought commodity are issued by KELER CCP on monthly basis. Invoicing is concluded according to novation:
• 1st invoice is issued when KELER CCP is in the buyer position and invoice will be issued by KELER CCP in the name of the seller on behalf of the seller
• 2nd invoice is issued when KELER CCP is in the seller position and invoice will be issued by KELER CCP in its own name
Purchase price invoices are issued on the 3rd business day following the subject month.
KELER CCP additionally issues its monthly fee invoices of the services provided until the 5th business day following the subject month.
How clearing reports will be received?
Clearing reports are sent in pdf and xml format on T-day around 7 p.m. CET.
What will be the eligible assets accepted as collateral?
As of today Clearing Members can provide collateral solely in the form of cash in the trading currency, e.g. EUR.
Which are the designated Settlement Bank partners?
Contact details of actual Settlement Bank partners can be found here.
What happens, when something goes wrong, and any of the trading participants won’t comply with the requirements?
KELER CCP has a well developed, reliable default management process, which proved to be effective throughout it’s more than two decades of business experience. If the Clearing Member fails to meet its obligations by the applicable deadline, KELER CCP takes steps without delay to suspend the clearing right (defaulting party closed from trading) and starts to take the available collaterals in order to mitigate financial risk and indemnify the affected parties in line with the default waterfall*.
Upon request KELER CCP will restore the clearing right of the clearing member only after the member met with its obligation.
*KELER CCP applies an EMIR compliant guarantee system, and will use its elements in case of a member’s default as follows:
1. collaterals and available balances of the defaulting member
2. default fund contribution of the defaulting member
3. KELER CCP dedicated own resources allocated to BGH default fund
4. default fund contributions of the non-defaulting members
5. remaining other financial resources of KELER CCP
What kind of additional services are provided to the clients?
Starting in 2014 with EMIR (European Market Infrastructure) reporting obligation, KELER CSD has established an ancillary service line in addition to its core services. KELER CSD as a reporting agent collects and forwards the required details of derivative and energy trades concluded by its clients (market participants) and forwards them to the relevant trade repository or authority. In it’s proprietary system, ‘Trade Reporting’, it offers a one - stop- shop solution to obligatory reporting matters under EMIR and REMIT (Regulation on wholesale Energy Market Integrity and Transparency). In case the Clearing Member has a contract for reporting with KELER CSD, KELER CCP can report transactions in the name of the Clearing Member that are under the EMIR reporting obligation. Transactions traded on the BGH long-term market are not subject to EMIR reporting obligation.