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    Default Management

    Rules and processes for member default

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    Default Rules

    The rules governing when a clearing member could be considered to be in default are stated in section 1.8 in the Clearing Rules for Nasdaq Derivatives Markets and in section 8 in the General Terms of the Clearing Rules of the Commodity Derivatives Markets.

    Clearing members are inter alia considered to be in default in either of the following circumstances:

    • The member has breached the Rules and Regulations of Nasdaq Clearing or other regulations regarding Nasdaq Clearing's clearing operations.
    • In the judgment of Nasdaq Clearing, there is a substantial risk that the clearing member will breach these rules and regulations or other regulations regarding the clearing operations.

    The rules governing when a clearing member could be considered to be in default are stated in section 1.8 in the Clearing Rules for Nasdaq Derivatives Markets and in section 8 in the General Terms of the Clearing Rules of the Commodity Derivatives Markets.

    Clearing members are inter alia considered to be in default in either of the following circumstances:

    • The member has breached the Rules and Regulations of Nasdaq Clearing or other regulations regarding Nasdaq Clearing's clearing operations.
    • In the judgment of Nasdaq Clearing, there is a substantial risk that the clearing member will breach these rules and regulations or other regulations regarding the clearing operations.
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    For a full list of circumstances that may trigger a default event, refer to the Rules and Regulations of Nasdaq Clearing.

    If a clearing member is declared in default, Nasdaq Clearing has the right to elect to take one or more of the measures at the expense of the defaulting party specified in the Default Management Procedures under the Resource Center.

    Default Management Procedures

    For a full list of circumstances that may trigger a default event, refer to the Rules and Regulations of Nasdaq Clearing.

    If a clearing member is declared in default, Nasdaq Clearing has the right to elect to take one or more of the measures at the expense of the defaulting party specified in the Default Management Procedures under the Resource Center.

    Default Management Procedures ->

    Default Process

    The Nasdaq Clearing Default Committee is the decision-making authority within Nasdaq Clearing for declaring default events and deciding which, if any, actions will be taken as permitted under its Rules and Regulations as well as any applicable legal agreements.

    Default situations due to clearing members not having met their end-of-day margin requirement, default fund requirement or intra-day margin call requirement two hours past the deadline, will be escalated directly to the Default Committee, while other default situations might first be escalated to the Credit Committee and then handed over to the Default Committee if the Credit Committee assesses that the Default Committee should evaluate whether the situation should be assessed as a default event.

    The Nasdaq Clearing Default Committee is the decision-making authority within Nasdaq Clearing for declaring default events and deciding which, if any, actions will be taken as permitted under its Rules and Regulations as well as any applicable legal agreements.

    Default situations due to clearing members not having met their end-of-day margin requirement, default fund requirement or intra-day margin call requirement two hours past the deadline, will be escalated directly to the Default Committee, while other default situations might first be escalated to the Credit Committee and then handed over to the Default Committee if the Credit Committee assesses that the Default Committee should evaluate whether the situation should be assessed as a default event.

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    The Credit Committee and the Default Committee are made up of the following representatives in order to help ensure that all decisions are well informed.

    Default Committee:

    • Head of Clearing Risk (Chairperson)
    • Chief Executive Officer (CEO)
    • Chief Risk Officer (CRO)
    • Chief Compliance Officer (CCO) (advisory role)
    • Nasdaq Europe Deputy General Counsel, Legal
    • Representative from CCP Treasury

    The Credit Committee and the Default Committee are made up of the following representatives in order to help ensure that all decisions are well informed.

    Default Committee:

    • Head of Clearing Risk (Chairperson)
    • Chief Executive Officer (CEO)
    • Chief Risk Officer (CRO)
    • Chief Compliance Officer (CCO) (advisory role)
    • Nasdaq Europe Deputy General Counsel, Legal
    • Representative from CCP Treasury

    In addition, experts within relevant areas can be invited to the Default Committee meetings as observers (in a non-voting capacity).

    Credit Committee:

    • Chief Risk Officer (Chairperson)
    • Chief Executive Officer (CEO)
    • Head of Clearing Risk (Secretary)
    • Nasdaq Europe Deputy General Counsel, Legal
    • Head of CCP Finance & Business Management
    • Head of CCP Treasury (Observer)

    In addition, experts within relevant areas can be invited to the Default Committee meetings as observers (in a non-voting capacity).

    Credit Committee:

    • Chief Risk Officer (Chairperson)
    • Chief Executive Officer (CEO)
    • Head of Clearing Risk (Secretary)
    • Nasdaq Europe Deputy General Counsel, Legal
    • Head of CCP Finance & Business Management
    • Head of CCP Treasury (Observer)
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    The Default Committee has the mandate issued by the Board of Nasdaq Clearing to act in every possible way, provided that this is in accordance with the Rules and Regulations, to reduce the risk in the portfolio, which in turn reduces the risk of the non-defaulting clearing members and Nasdaq Clearing. The Default Committee decides on the close-out strategy, including how to hedge and close-out the portfolio, and will take into consideration internal and external factors at the time of the default event.

    Nasdaq Clearing has pre-defined default management strategies for its different clearing services, approved by the Nasdaq Clearing Risk Committee. The strategies are revised at least annually and regularly tested.

    The Default Committee has the mandate issued by the Board of Nasdaq Clearing to act in every possible way, provided that this is in accordance with the Rules and Regulations, to reduce the risk in the portfolio, which in turn reduces the risk of the non-defaulting clearing members and Nasdaq Clearing. The Default Committee decides on the close-out strategy, including how to hedge and close-out the portfolio, and will take into consideration internal and external factors at the time of the default event.

    Nasdaq Clearing has pre-defined default management strategies for its different clearing services, approved by the Nasdaq Clearing Risk Committee. The strategies are revised at least annually and regularly tested.

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    Resource Center

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