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Clearing and Settlement

The bilateral trades executed in CRYEX trading system will be cleared and settled by CRYEX Clearing. CRYEX Clearing will novate the trades and take on the responsibility for the obligations that emanates from the trades. CRYEX Clearing will become the counterparty in the trades through the novation process. Clearing members of CRYEX Clearing participate in the clearing operation and, as a result of the novation process, have the counterparty risk on CRYEX Clearing. This facilitates the administration for the clearing member, and it concentrates the risks to the central counterparty instead of having the counterparty risk with each bilateral counterparty.

The novation process implies that the clearing member will only have counterparty risk against the central counterparty (CRYEX Clearing). Normally, a central counterparty has a lower risk profile than other financial institutions due to i.e. stringent membership criteria (covering both financial and operational requirements), regulatory supervision, risk calculations and collateralization, and netting of obligations. In addition, a central counterparty is a non-speculative institution.

The clearing process runs through the Cinnober Real Time Clearing system. The system performs in real time, i.e. aggregation and netting of positions, margin calculations, reconciliation of collateral, and calculation of net settlement obligations. CRYEX Clearing will use one or several settlement bank(s), initially it will be Barclays.

Clearing Members can use their own settlement banks but margins (collateral) will have to be posted at CRYEX settlement bank(s). At the end of a trading day Clearing Members are issued pay-in or pay-out instructions from CRYEX Clearing.

The next day the net settlement amounts are settled using SWIFT messages where paying-in members pay into the transit settlement account at CRYEX Clearing’s settlement bank(s) and CRYEX Clearing pays out the net settlement amount to the receiving Clearing Member’s bank.