Nasdaq Clearing
Collateral Management
Managing collateral for clearing on Nasdaq derivatives markets
Procedures and Forms for Management of Collateral, Cash and Physical Settlement
Collateral Management Service
The Collateral Management Service (CMS) is the service managing collateral for clearing on Nasdaq Financial and Commodities derivatives markets. The service manages both cash and non-cash collateral for covering margin requirements as well as cash transactions for daily cash settlement (premiums, fees, variation margin (mark-to-market)). The collateral flows are managed in an advanced cash optimization process taking into account both cash and non-cash collateral to optimize each participant’s use of collateral and to minimize the number of cash transactions to and from the Collateral Management Service.
Participants hold specific custody accounts at Nasdaq Clearing for use with the Collateral Management Service and both cash and non-cash collateral can be registered on the same custody account.
In addition, participants must hold a bank account within an approved settlement bank in each applicable currency for managing cash transfers to and from the Collateral Management Service. To enable efficient cash transactions the service has an integrated payment system that with the use of direct debit instructions enable automatic cash transfers. Automatic cash transfers are, together with the use of the cash optimization feature, used to fully automate the flow of cash collateral to and from the collateral management service.
To control the flow of collateral, participants can also instruct collateral transactions outside the automated flow. Posting of supplementary cash collateral to a custody account is achieved by depositing cash to a Nasdaq Clearing collateral bank account in one of the settlement banks approved for the service. Bank accounts for this purpose are available for each of the eligible cash collateral currencies. Posting securities to a custody account is done through one of the CSDs/ICSDs/custodians connected to the collateral management service. Participants do not need to be a direct member of a CSD or ICSD, but can use a settlement agent to execute securities transactions.
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The Collateral Management Service (CMS) is the service managing collateral for clearing on Nasdaq Financial and Commodities derivatives markets. The service manages both cash and non-cash collateral for covering margin requirements as well as cash transactions for daily cash settlement (premiums, fees, variation margin (mark-to-market)). The collateral flows are managed in an advanced cash optimization process taking into account both cash and non-cash collateral to optimize each participant’s use of collateral and to minimize the number of cash transactions to and from the Collateral Management Service.
Participants hold specific custody accounts at Nasdaq Clearing for use with the Collateral Management Service and both cash and non-cash collateral can be registered on the same custody account.
In addition, participants must hold a bank account within an approved settlement bank in each applicable currency for managing cash transfers to and from the Collateral Management Service. To enable efficient cash transactions the service has an integrated payment system that with the use of direct debit instructions enable automatic cash transfers. Automatic cash transfers are, together with the use of the cash optimization feature, used to fully automate the flow of cash collateral to and from the collateral management service.
To control the flow of collateral, participants can also instruct collateral transactions outside the automated flow. Posting of supplementary cash collateral to a custody account is achieved by depositing cash to a Nasdaq Clearing collateral bank account in one of the settlement banks approved for the service. Bank accounts for this purpose are available for each of the eligible cash collateral currencies. Posting securities to a custody account is done through one of the CSDs/ICSDs/custodians connected to the collateral management service. Participants do not need to be a direct member of a CSD or ICSD, but can use a settlement agent to execute securities transactions.
Calculation of Margin Requirement
Collateral posted to Nasdaq can be segregated by the clearing member's house, a group of clients, a group of indirect clients or on a client-by-client basis based on the participant’s account setup.
The process of valuation and evaluation of collateral is fully automated and is done per segregation category (e.g. for house, clients, indirect clients and individual clients) as further described in the rules. During the daily cash optimization process, posted collateral is valued using market prices taking into account applicable haircuts and pending transactions and is then evaluated to make sure the collateral value is sufficient to cover the participant’s margin requirement(s). In case of deficit, a direct debit transaction is executed to cover the shortage and in the case of a surplus, a credit instruction is automatically executed (subject to settings on each account).
Margin requirements, daily cash settlement information as well as information on cash optimization transactions are retrieved through Genium INET Clearing Workstation 1 and Q-Port, over the OMnet API or via CMS Web. Settlement instructions for posting and withdrawing cash and securities are done via SWIFT Net, over MQ or through the CMS Web application.
Through the CMS Web application, a user can access custody-related information including complete management of collateral. The CMS Web application also holds margin requirements and collateral evaluation information from the clearing system. More information about the CMS Web tool can be found under the clearing Technology and Connectivity section.
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Collateral posted to Nasdaq can be segregated by the clearing member's house, a group of clients, a group of indirect clients or on a client-by-client basis based on the participant’s account setup.
The process of valuation and evaluation of collateral is fully automated and is done per segregation category (e.g. for house, clients, indirect clients and individual clients) as further described in the rules. During the daily cash optimization process, posted collateral is valued using market prices taking into account applicable haircuts and pending transactions and is then evaluated to make sure the collateral value is sufficient to cover the participant’s margin requirement(s). In case of deficit, a direct debit transaction is executed to cover the shortage and in the case of a surplus, a credit instruction is automatically executed (subject to settings on each account).
Margin requirements, daily cash settlement information as well as information on cash optimization transactions are retrieved through Genium INET Clearing Workstation 1 and Q-Port, over the OMnet API or via CMS Web. Settlement instructions for posting and withdrawing cash and securities are done via SWIFT Net, over MQ or through the CMS Web application.
Through the CMS Web application, a user can access custody-related information including complete management of collateral. The CMS Web application also holds margin requirements and collateral evaluation information from the clearing system. More information about the CMS Web tool can be found under the clearing Technology and Connectivity section.
Cash Optimization
The Cash Optimization Service is a payment netting arrangement whereby amounts in a permitted currency across all Clearing Accounts or Integrated Trading and Clearing Accounts are netted for operational efficiency. Certain operational aspects of Cash Optimization Service are described in Cash Optimization Service Procedures document.
The daily cycle illustrated in the figure below provides an overview of the daily events and when they occur.
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The Cash Optimization Service is a payment netting arrangement whereby amounts in a permitted currency across all Clearing Accounts or Integrated Trading and Clearing Accounts are netted for operational efficiency. Certain operational aspects of Cash Optimization Service are described in Cash Optimization Service Procedures document.
The daily cycle illustrated in the figure below provides an overview of the daily events and when they occur.
Eligible Collateral
Margin requirements may be fulfilled using approved securities or cash in the eligible currencies. The eligible collateral list is found in the Rules of the respective market and on the CMS Web.
For the Financial Markets the collateral list can be found under the appendices section (Appendix 14) of the Clearing Rules of Nasdaq Derivatives Markets.
The eligible collateral list for Nasdaq Commodities can be found in Appendix 10 of the General Terms of the Clearing Rules of Nasdaq Commodities.
The list of eligible collateral is continuously monitored and changed if deemed necessary. If a security type accepted as collateral is deemed riskier than acceptable, the collateral will be removed from the list. If a security type meets the criteria of having low market and credit risk, sufficient liquidity and daily prices, the security type can be added to the list of eligible collateral. Any such changes will be communicated via exchange notices well in advance.
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Margin requirements may be fulfilled using approved securities or cash in the eligible currencies. The eligible collateral list is found in the Rules of the respective market and on the CMS Web.
For the Financial Markets the collateral list can be found under the appendices section (Appendix 14) of the Clearing Rules of Nasdaq Derivatives Markets.
The eligible collateral list for Nasdaq Commodities can be found in Appendix 10 of the General Terms of the Clearing Rules of Nasdaq Commodities.
The list of eligible collateral is continuously monitored and changed if deemed necessary. If a security type accepted as collateral is deemed riskier than acceptable, the collateral will be removed from the list. If a security type meets the criteria of having low market and credit risk, sufficient liquidity and daily prices, the security type can be added to the list of eligible collateral. Any such changes will be communicated via exchange notices well in advance.
Interest on Cash Collateral
Interest on cash contributions is calculated using the Nasdaq deposit rate (NDR). Current interest rates can be found on the CMS Web.
Interest will accrue daily and be capitalized on a monthly basis. After capitalization the capitalized interest will either be debited from participant’s custody account balance or paid to the participant's bank account according to the settlement instruction supplied by the participant.
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Interest on cash contributions is calculated using the Nasdaq deposit rate (NDR). Current interest rates can be found on the CMS Web.
Interest will accrue daily and be capitalized on a monthly basis. After capitalization the capitalized interest will either be debited from participant’s custody account balance or paid to the participant's bank account according to the settlement instruction supplied by the participant.
Securities as Collateral
You may choose to cover your Margin Requirement with Securities. Prerequisites are that you either have direct access to your depository in the actual (I)CSD or use a custody bank in relation to such (I)CSD and in order to post securities as collateral you need to provide your SSI-details to Nasdaq Clearing via the Member Portal request.
When the SSI is in place, you process the deposit through the CMS WEB-portal. The instruction in CMS WEB creates Nasdaq's receiving instruction (Free of Payment) to the actual (I)CSD and you or your custody bank must then send a matching instruction to the (I)CSD in order to have the deposit settled. When the deposit is settled in the I(CSD), a deposit confirmation message will be sent to the Clearing system which increases your collateral value connected to the custody (Margin) account in question.
The instruction and its status can be monitored in the CMS WEB portal, which also displays the collateral value after the deposit is settled. The portal also includes the list of securities eligible to post as collateral.
A call back of securities works in the same way as a deposit. The instruction is registered in the CMS WEB portal, the request for call back is sent to the clearing system and is evaluated at 11:05 CET. If your collateral surplus allows, the system will send a delivery instruction (free of payment) to the (I)CSD which you or your custody bank must meet with your own receiving instruction in order to have it matched and settled on your own depository.
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You may choose to cover your Margin Requirement with Securities. Prerequisites are that you either have direct access to your depository in the actual (I)CSD or use a custody bank in relation to such (I)CSD and in order to post securities as collateral you need to provide your SSI-details to Nasdaq Clearing via the Member Portal request.
When the SSI is in place, you process the deposit through the CMS WEB-portal. The instruction in CMS WEB creates Nasdaq's receiving instruction (Free of Payment) to the actual (I)CSD and you or your custody bank must then send a matching instruction to the (I)CSD in order to have the deposit settled. When the deposit is settled in the I(CSD), a deposit confirmation message will be sent to the Clearing system which increases your collateral value connected to the custody (Margin) account in question.
The instruction and its status can be monitored in the CMS WEB portal, which also displays the collateral value after the deposit is settled. The portal also includes the list of securities eligible to post as collateral.
A call back of securities works in the same way as a deposit. The instruction is registered in the CMS WEB portal, the request for call back is sent to the clearing system and is evaluated at 11:05 CET. If your collateral surplus allows, the system will send a delivery instruction (free of payment) to the (I)CSD which you or your custody bank must meet with your own receiving instruction in order to have it matched and settled on your own depository.
Cancellation of Instrument Collateral Settlement Instructions
Settlement instructions, that were not matched/settled towards Nasdaq Clearing before end of day on the intended settlement day, will be cancelled at CMS closing time or in some cases by 9:30 CET cash optimization batch next morning.
As matched instructions must be bilaterally cancelled, Nasdaq Clearing's counterparties are expected to also cancel their instruction. Instructions with future settlement date will be left pending until settlement day and canceled if not matched/settled at CMS closing time. If cancellation instructions are matched, bilateral cancellation will take place.
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Settlement instructions, that were not matched/settled towards Nasdaq Clearing before end of day on the intended settlement day, will be cancelled at CMS closing time or in some cases by 9:30 CET cash optimization batch next morning.
As matched instructions must be bilaterally cancelled, Nasdaq Clearing's counterparties are expected to also cancel their instruction. Instructions with future settlement date will be left pending until settlement day and canceled if not matched/settled at CMS closing time. If cancellation instructions are matched, bilateral cancellation will take place.
Hold and Release
Nasdaq Clearing will only utilize the so-called Hold and Release functionality for collateral callbacks where collateral callbacks with future settlement dates are instructed with "party hold" and released on settlement date after delivery capacity check.
For other flows, Nasdaq Clearing will not instruct with "party hold".
It is expected that members will not put their settlement instructions on hold towards Nasdaq Clearing jeopardizing that settlement instructions fail to settle on the intended settlement date.
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Nasdaq Clearing will only utilize the so-called Hold and Release functionality for collateral callbacks where collateral callbacks with future settlement dates are instructed with "party hold" and released on settlement date after delivery capacity check.
For other flows, Nasdaq Clearing will not instruct with "party hold".
It is expected that members will not put their settlement instructions on hold towards Nasdaq Clearing jeopardizing that settlement instructions fail to settle on the intended settlement date.
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Fee Type Fee Detail Fee Excluding VAT VAT Safekeeping Fee Safekeeping Fee 40 EUR/Month/Custody Account X
CSD/ICSD Segregation Fee CSD/ICSD Segregation 200 EUR/Month/Account X
CSD/ICSD Segregation in beneficial owner account 200 EUR/Month/Account X
Security Collateral Fee Nasdaq Derivatives Markets Securities Tiered model, see separate section below For any amount exceeding the total margin requirement, 0 bp12 Security Collateral Fee Nasdaq Commodities Market Securities/Bank Guarantees Up to the total margin requirement, 10 bp (securities)/20bp (bank guarantees) annualized on market value For any amount exceeding the total margin requirement, 0 bp Security Collateral Fee Nasdaq Default Fund Securities Up to the total default fund requirement, 10 bp annualized on market value For any amount exceeding the default fund requirement, 0 bp Corporate Action Voluntary Corporate Action TBD X
Securities Transaction Fee Deposit Free Call Back 30 EUR/Transaction Cash Transaction Fee Deposit Free Call Back 30 EUR/Transaction Premium Subscription Fee Daily statements 60 EUR/Month/Custody Account X
MT535 Statement of Holdings MT536 Statement of Transactions MT940 Customer Statement Message CMS Web License Fee 60 EUR/Month/User X
1 0 bp for securities held by clients active in IRS OTC clearing.
2 0 bp for securities held in Intraday Funding Collateral Account.Fee types, levels and VAT subject to change. Fees subject to VAT according to Council Directive 2006/112/EC of 28 November 2006.
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All collateral posted by the account holder is registered/reflected on custody accounts in Nasdaq's system. An account holder will typically hold one custody account for house business and one custody account for client business. In addition, separate custody accounts per segregated clients are supported.
A fixed safekeeping fee in EUR per month and per custody account is charged.
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An account holder can request its securities collateral to be segregated at the CSD/ISCD. In this case, Nasdaq will hold the securities on an individual securities account on behalf of client in the CSD/ICSD. Segregation on beneficial owner accounts is supported where regulations requires.
Securities
Security Collateral Fee
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Nasdaq applies a security collateral fee for securities calculated in basis points annualized on market value. The fee level depends on the proportion of cash and securities on the custody account and the total market value of the securities collateral that is used to cover the total margin requirement. Actual fee levels can be found in the table below. The fee is charged on a monthly basis by aggregation of the daily fee calculation based on end of day security market value on the custody account, excluding any excess collateral. The fee is calculated using actual/360-day convention.
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End of day market value of the securities collateral in the custody account. Fee will be charged for all applicable tiers. Security collateral fee for custody accounts where cash collateral constitutes 10% or more of the total collateral value used to cover total margin requirement Security collateral fee for custody accounts where cash collateral constitutes less than 10% of the total collateral value used to cover total margin requirement > EUR 250 million 10 bps 13 bps < EUR 250 million 12 bps 15 bps On a daily basis, the total collateral market value is calculated per holding on the Custody Account in the collateral denominated currency. The amounts are then converted to EUR using the exchange rates for that day.
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Nasdaq applies a security collateral fee for securities calculated in basis points annualized on market value. The fee is charged per custody account on a monthly basis based on the pledged securities daily market value that is used to cover the total margin requirement. The fee is calculated using actual/360-day convention.
On a daily basis, the securities market value is calculated per holding on the custody account in the securities denominated currency. The fee amount are then converted to EUR using the exchange rates for that day. At the end of the month, the fees are aggregated to obtain the monthly fee per custody account.
No tiers or other rebates are applicable for the securities collateral fee on Nasdaq Commodities.
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Nasdaq applies a security collateral fee for securities calculated in basis points annualized on market value. The securities market value is calculated per holding on the default fund custody account on a daily basis. The fee is charged on a monthly basis by aggregation of the daily fee calculation based on end of day security market value on the default fund custody account, excluding any excess collateral. The fee is calculated using actual/360-day convention. No tiers or other rebates are applicable for the securities collateral fee on the Nasdaq Default Fund. Bank guarantees cannot be used on the default fund.
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An administrative fee for voluntary corporate action will be charged.
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Deposit of securities is free of charge. Instrument callback of securities is associated with an administration fee.
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Deposit of cash is free of charge. In case excess cash is called back, an administration fee is charged.
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Account holders can subscribe to the statement of holdings, statement of transactions, customer statement message and fee instruction services. The service is offered free of charge for monthly statements. The subscription can be requested through completing the Member Preferences – Fees and Subscriptions form (Appendix 4) and submitting it to Nasdaq.
The subscription includes monthly statements distributed on the last business day of the month.
- MT535 Statement of Holdings (SWIFTNet or email/PDF) - holdings last day of month
- MT536 Statement of Transactions (SWIFTNet) - transactions during the month
- MT940 Customer Statement Message (SWIFTNet or email/PDF) - transactions during the month, including opening balance and closing balance
- Fee Instruction (email/PDF)
Account holders who prefer daily statements can sign up for the premium subscription service through completing the Member Preferences – Fees and Subscriptions form and returning this to Nasdaq. The premium subscription service is associated with a monthly fee per custody account and includes statements of the following:
- MT535 Statement of Holdings (SWIFTNet or email/PDF)
- MT536 Statement of Transactions (SWIFTNet)
- MT940 Customer Statement Message (SWIFTNet or email/PDF)
In addition to ISO statements, the above information can be viewed on a daily basis in the CMS web application.
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The CMS Web application is used for administration of collateral to cover margin requirements and contributions to the default fund. A fee is charged per each user (admin and regular user). An account holder needs at least one admin user.
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Account holders can connect to the Custody System through MQ. Contact Nasdaq for more information.
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+46 8 405 6750
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Resource Center
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- Nasdaq Collateral Custody Account Agreement
- General Terms for Collateral Custody Accounts
- Nasdaq Default Fund Custody Account Agreement
- General Terms for Default Fund Custody Account Agreement
- Loss Sharing Custody Account Agreement
- General Terms for Loss Sharing Account Agreement
- Bank Guarantee Template
Relaterad information
Governance, Policies, Regulations
About Nasdaq Clearing
Legal and regulatory information from and about Nasdaq Clearing AB.
Clearing Rules
Rules & Regulations
The rules and regulations of Nasdaq Derivatives Markets govern Nasdaq Stockholm's derivatives exchange and Nasdaq Clearing.
Commodities Rules & Regulations
Legal Framework
Legal documentation regarding trading membership at Nasdaq Oslo ASA and clearing membership at Nasdaq Clearing AB.
Technology and Connectivity
Technology
All markets are cleared in a collateral management system.
Approved Settlement Banks
Settlement Banks
Banks approved for settlement with Nasdaq Clearing.
Settlement, Expiration and Delivery
Nasdaq Clearing
Expiration and delivery procedures for derivatives contracts.