KELER CCP Ltd. (hereinafter KELER CCP) considers it highly important that the multinet market Clearing Members shall meet with the settlement deadlines, because it is the common interest of the market participants that every direct and indirect system participant receive their purchased securities in due time.
Detail from KELER CCP’s General Business Rules (hereinafter GBR):[1]
3.5.1.1. Obligations of the Clearing Member
f) be liable for the fulfilment of its transactions made on the financial market for its own account, for Principals as well as for Non-clearing Members (own and Principal), for the fulfilment of own account transactions and imbalance transactions concluded on the gas market in line with the provisions of the present Rules
To meet with the Central Bank of Hungary’s (hereinafter MNB) expectations and in line with its own opinion KELER CCP tries to reduce the number of defaults related to securities that were settled later than the settlement deadline set in the rules.
In line with its effective GBR KELER CCP has the following tools to sanction the default or repeated default events of Clearing Members:
1. Imposing additional financial collateral considering the amount of the default and the numbers of the defaults as well
Detail from KELER CCP’s GBR:
3.5.1.2. Rights of KELER CCP in case of infringement by the Clearing Member
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- to impose an additional financial collateral on the Clearing Member even on the Non-clearing Member or Principal position
KELER CCP considers the following aspects when exercising the right to apply sanctions related to failure to meet the obligations stated in Section III:
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- frequency, repetition of breach of obligations,
- period between repeated breaches of obligations,
- weight of breaches, presumed expected extent of negative impact on the secure operation of KELER CCP as central counterparty,
- expected volume of additional activities to be performed by KELER CCP in order to remedy the situation resulting from the breaches of obligations, the risk estimated by KELER CCP of the temporary loss of focus triggered by the breaches of obligations.
2. Detaining cash and securities credits of the defaulting Clearing Member in line with the GBR’s 7.3.chapter:
Detail from KELER CCP’s GBR:
7.3.2. General rules on default
In case of default on transactions with multinet settlements KELER CCP is entitled to detain securities credits to the defaulting Clearing Member and following the provision of appropriate collaterals it might partially or fully terminate the detainment. Following individual assessment, KELER CCP detains securities credits to the defaulting Clearing Member after 16:00 hrs. only to the extent justified by default. Posting credit items in excess of the justified part will be approved as far as possible until 16:00 hrs. on the clearing day concerned. For the detained securities the same rule applies as for the securities taken as collaterals.
3. Suspension of clearing right
Detail from KELER CCP’s GBR:
3.4.2.1.2. Entitlement to suspend Clearing Rights
i) an increase in the risk of the Clearing Member is noticed
Hereby we ask you to pay close attention to your settlement obligations to be fulfilled in due time, and if it is not possible because of any reasons please be prepared for the sanctions to be used by KELER CCP if it is necessary.
Thank you for your understanding and cooperation!
KELER CCP Ltd.