RULEBOOK OF THE BUCHAREST CLEARING HOUSE
Disclaimer: This document and the information contained therein are intended for illustrative purposes only. The Romanian version alone is a legally binding document. Although every effort was made to ensure the accuracy and completeness of the information contained in this document, BCH disclaims liability for errors, omissions or future changes.
- 1 -
Table of Contents
PRELIMINARY TITLE
CHAPTER I GENERAL PROVISIONS
Section 1 Legislation framework
Section 2 Terminology
TITLE I THE CLEARING-SETTLEMENT SYSTEM
CHAPTER I ROLE AND OPERATIONS PERFORMED BY BCH
Section 1 General framework
Section 2 BCH operations
CHAPTER II PARTICIPANTS TO THE CLEARING-SETTLEMENT SYSTEM
Section 1 General framework
Section 2 Clearing and non-clearing members
CHAPTER III CLEARING AND SETTLEMENT OF FUTURES CONTRACTS
Section 1 General framework
Section 2 Daily/final profit and loss
Section 3 Daily settlement of futures contracts
Section 4 Clearing-settlement reports
Section 5 Settlement of futures contracts by physical delivery
CHAPTER IV THE ELECTRONIC CLEARING-SETTLEMENT SYSTEM
TITLE II RISK MANAGEMENT
CHAPTER I THE POSITION OF CENTRAL COUNTERPART
Section 1 General framework
Section 2 BCH Obligations
Section 3 BCH financial resources
CHAPTER II PARTICIPANTS' RISKS
Section 1 General framework
Section 2 Risk categories
CHAPTER III OPERATIONAL RISK
Section 1 General framework
Section 2 Administration of the operational risk
CHAPTER IV DEFAULT CASES
TITLE IIICLEARING AND NON-CLEARING MEMBERS
CHAPTER I GENERAL PROVISIONS
CHAPTER II GRANTING / SUPERVISION / MAINTENANCE / SUSPENSION /
WITHDRAWAL OF THE CLEARING MEMBER STATUS
Section 1 Granting of the clearing member status
Section 2 Supervision and maintenance of the clearing member status
Section 3 Suspension of the clearing member status
Section 4 Withdrawal of the clearing member status
CHAPTER III GENERAL CLEARING MEMBERS AND NON-CLEARING MEMBERS
Section 1 General framework
Section 2 The clearing-settlement contract concluded between GCM and NCM
Section 3 Suspension / ceasing of the clearing settlement contract between GCM and NCM
CHAPTER IV CLEARING -SETTLEMENT AGENTS
Section 1 General framework
Section 2 Granting and withdrawal of the clearing-settlement agent status
TITLE IV THE ACCOUNTS AND MARGIN SYSTEM
CHAPTER I GENERAL PROVISIONS
CHAPTER II THE ACCOUNTS SYSTEM
Section 1 Position accounts
Section 2 Margin accounts
CHAPTER III THE MARGIN SYSTEM
Section 1 General framework
Section 2 Eligible assets to be brought in as collateral
Section 3 Collateral bringing in and administration
Section 4 Margin types
Section 5 The unit margin
Section 6 The margin requirement
Section 7 Margin account excess and deficit
CHAPTER IV THE MARGIN CALL
Section 1 Margin call situation
Section 2 Margin call
Section 3 Meeting/failure to meet the margin call
CHAPTER V MARK-TO-MARKET
Section 1 Daily settlement price
Section 2 Final settlement price
TITLE V MARKET OPERATIONS
CHAPTER I STOCK EXCHANGE ORDERS AND FD TRANSACTIONS
Section 1 General framework
Section 2 Stock exchange orders
Section 3 Validation and invalidation of FD transactions
CHAPTER II POSITIONS' MANAGEMENT
Section 1 Initiation or modification of an open position
Section 2 Liquidation of open positions
§1General framework
§2Clearing members closing off positions
§3BCH closing off positions prior to maturity
§4BCH closing off positions at maturity y
Section 3 Transfer of open positions
Section 4 Limits regarding open positions
§1Position limits
§2Reporting limits
§3Exposure limits
TITLE VI FINANCIAL RESOURCESRESERVES
CHAPTER I GENERAL PROVISIONS
CHAPTER II THE GUARANTEE FUND
Section 1 General framework
Section 2 Resources of the Guarantee Fund
Section 3 Initial contribution
Section 4 Annual contribution
Section 5 The Guarantee Fund financial resources
Section 6 Financial resources resulting from the liquidation of BCH claims
Section 7 Other BCH reserve funds
Section 8 Short time loans
Section 9 Guarantee Fund usage
Section 10 Special contributions
Section 11 Restoring contributions to the Guarantee Fund
TITLE VII OPERATIONS PERFORMED IN FOREIGN COUNTRIES
TITLE VIII TRANSITORY AND FINAL PROVISIONS
PRELIMINARY TITLE
CHAPTER I GENERAL PROVISIONS
Section 1 Legislation framework
Art. 1
“The Code of the Bucharest Clearing House” establishes procedures for operations concerning the clearing and settlement of transactions involving financial derivatives, as concluded on the forward regulated market managed by the Bucharest Stock Exchange, as well as for other related operations, in accordance with:
a)Law no. 297/2004 on the capital market, as further amended and supplemented (“Law no. 297/2004”);
b)Law no. 253/2004 on the final nature of settlement, in payment and settlement systems of operations involving financial instruments (“Law no. 253/2004”);
c)Government Ordinance no. 9/2004 of January 22, 2004 on certain financial guarantee contracts approved by Law no. 222/2004 (“GovernmentOrdinance no. 9/2004”);
d)Regulation no. 13/2005 of the National Securities Commission on the authorization and functioning of the central depository, clearing houses and central counterparts, as further amended and supplemented (“NSCRegulation no. 13/2005”);
e)Regulation no. 32/2006 of the National Securities Commission regarding financial investment services (“NSCRegulation no. 32/2006”);
f)Instruction no. 3/2006 of the National Securities Commission regarding the registration of financial derivatives with NSC (NSC Instruction no.3/2006);
g)Order no. 110/2006 of the National Bank of Romania for the indication of systems that shall be covered by the provisions of Law no. 253/2004 regarding the final status in payment systems and in settlement systems of operations involving financial instruments (“NBROrder no. 110/2006”);
h)Other related regulations issued by the National Securities Commission and the National Bank of Romania.
Art. 2
Provisions of this Regulation shall be completed accordingly by the BCH issued procedures as adopted by the Board of the Bucharest Clearing House, and approved by the National Securities Commission previous to their entering into force.
Section 2 Terminology and expressions
Art. 3
(1) For the purposes hereof, the terminology presented below shall have the following meaning:
The Underlying Asset represents the financial instrument, the stock exchange or foreign currency index, the interest rate, the commodity, as well as any other asset or instrument whose price, rate or measurement unit stands at the basis of the value of a FD.
The Clearing-Settlement Agent is the agent for financial investment services registered with the NSC registry, an employee of a clearing member, who is carrying out financial derivatives clearing-settlement operations by means of the electronic clearing-settlement system.
Margin call is the mandatory request made by BCH to a clearing member, respectively by a clearing member to a client or a non-clearing member, for the meeting of requirements set for the margin account.
NBR is the National Bank of Romania.
BSE is the Bucharest Stock Exchange
BCH is the Bucharest Clearing House
NSC is the National Securities Commission.
The Clearing House Board is the BCH Board of Administration.
Margin accountis the account in which the following issues are indicated, as the case may be:
a)cash amounts and/or the equivalent value of financial instrumentsdeposited in the form of collaterals as a guarantee for open positions;
b)sums corresponding to the rights obtained and obligations assumed.
Position account is the account opened in the electronic clearing-settlement system for clearing/ non-clearing members and/or clients thereof, in which are indicated the contracts purchased and/or sold, as well as the positions opened with FD pursuant to the conclusion of transactions on the Financial Derivatives Market.
FuturesContract is a FD consisting of a standard contract, in accordance with the contract specifications established by BSE, creating for the contracting parties the obligation to purchase, respectively to sell a certain underlying asset at a specified future point in time (maturity date) at a price agreed at the moment of the conclusion of the respective transaction on the Financial Derivatives Market.
Options Contract or Option is a FD consisting of a standard contract, in accordance with the contract specifications established by BSE, by means of which the buyer has the right, but not the obligation, to buy (Call option) or to sell (Put option) for a certain price (the premium), a certain underlying at a predetermined price (the exercise price), during the entire life of the respective option (American-style options) or only upon expiration date (European-style options).
Quotation is the price negotiated at the moment of the transaction conclusion for a certain FD, which may be expressed in monetary units, index points, interest or efficiency rate, units, etc, according to contract specifications established by BSE.
Expiration Date or Expiration is the day of the maturity month when a certain FD series expires, and positions remaining open are closed by the BCH at the final settlement price.
Physical deliveryis the settlement of financial rights and obligations and the transfer of an underlying asset resulting pursuant to the process of final settlement.
Cash settlementis the settlement of the financial rights and obligations of clearing members resulting pursuant to the daily or final settlement process.
Daily settlementis the process by means of which are dailysettled financial rights and obligations resulting pursuant to the conclusion of transactions involving FD and the mark-to-market of positions opened on the basis of the daily settlement price.
Final settlement is the process by means of which the rights as well as the final and/or transfer financial obligations of an underlying assetare settled, upon maturity, as the case may be, as a result of the closing by the BCH of positions remaining open, pursuant to the final settlement price.
Default is thesituation when a participant to the clearing-settlement system does not meet his contract obligations towards BCH, as well as other special circumstances, according to the provisions hereof and the clearing-settlement agreement concluded by the respective participant with BCH.
Market Maker is the participant to the Financial Derivatives Market who undertakes to maintain the market liquidity for a certain FD using his own capital, by introducing and maintaining firm purchase and sales offers in his own name, as well as to conclude transactions at the prices showed by the respective firm offers, during the entire time period while the respective participant is holding the market maker capacity.
Financial Guarantee is the amount of money and/or financial instruments intended for the guarantee of financial obligations, in accordance with the provisions of Government Ordinance no. 9/2004 and Law no 297/2004.
FD is a generic term used for the identification of a financial derivative instrument, which is based on a certain underlying asset and unique specifications. There will be several series for each FD, sharing common specifications, the number thereof being determined according to delivery month and, as the case may be, to exercise prices available at a certain moment, in the case of options contracts.
Intermediary is the financial investments services company which is registered in the NSC Registry, authorized by NSC, the credit institution authorized by NBR in accordance with relevant banking legislation, or the entity equivalent thereto authorized by the competent authorities in a member or non-member state, to develop financial investment services.
Position Limit represents the maximum number of contracts in a position opened for one or several FD/ FD series, which may be held in possession in a separate position account.
Report Limit represents the number of contracts for a position opened in one or several FD/FD series, which, upon being reached or exceeded in a separate position account, shall generate for the account holder the obligation to present to BCH evidence regarding the existence of the collateral corresponding to the respective position account.
Contract/delivery Month represents the calendar month established by NSC registered specifications in which the contracts for a certain FD series shall expire or shall be closed by BCH, as the case may be.
Mark-to-market represents the updating operation of the margin account performed by BCH by means of reevaluating positions opened at a certain price (“quotation price”), determined according to the provisions hereof, for the purpose of establishing favorable or unfavorable differences corresponding to the rights obtained/obligations assumed in the Clearing-Settlement System administered by BCH.
Margin or Collateral represents the financial or another type of guarantee, brought in the form of monetary funds and/or financial instruments belonging to the categories of eligible assets according to the NSC Regulation 13/2005, for meeting the limits imposed to the margin account in order to guarantee financial obligations resulting from operations involving FD, performed on the Financial Derivatives Market. The minimum level of the amount existing in the margin account represents the margin requirement as further defined herein.
The Clearing Member is the intermediary participating directly to the Clearing-Settlement System, based on a contract concluded with BCH, as follows:
a)The General Clearing Member is the BCH counterpart and it shall guarantee the meeting of obligations resulting during the clearing-settlement process of transactions involving FD concluded in its own account, in the account of its clients as well as in the account of non-clearing members and clients thereof;
b)The individual clearing member is the BCH counterpart and it shall guarantee the meeting of obligations resulting during the clearing-settlement process of transactions involving FD concluded in the account of its clients and in its own account, as the case may be.
The Non-clearing Member is the intermediary or trader holding the capacity of a participant to the Financial Derivatives Market and who participates in an indirect way to the Clearing-Settlement System, by means of a general clearing member.
Multiplierrepresents the value expressed in monetary units (for example: 10 RON / USD / EUR, etc) or physical units (for example: 1.000 shares / obligations, etc), which is established in the FD specifications in order to establish the notional value of a FD contract.
The Margin requirement represents the minimum level of the amount existing in the margin account opened in the clearing-settlement electronic system, which shall need to be brought as a collateral, in accordance with the margin system used by BCH, as follows:
a)The Initial Margin Requirement shall be established according to the positions opened and the exchange orders placed in the electronic trading system;
b)The Maintenance Margin Requirement shall be established based on positions opened.
Exchange order represents the purchase or sales instruction introduced in the electronic trading system by a trading member for the purpose of concluding a transaction involving FD.
The Transfer Order represents the instruction given by a participant to the BCH administered Clearing-Settlement System, according to the provisions hereof, to:
a)make available to another participant a sum of money or any instruction implying the assuming or execution of a payment obligation; or
b)transfer the ownership or any other right over one or several FD, by means of writing thereof in the position account or by any other means.
The Trading member is the entity described as an intermediary, investments company or trader authorised by BSE as a participant to the BSE trading system for the purpose of developing operations on the forward regulated market.
Participant to the Clearing-Settlement System or Participant is the entity participating either directly or indirectly to the Clearing-Settlement System, and which belongs to one of the following categories:
a)BCH, as administrator of the Clearing-Settlement System;
b)Intermediaries and traders registered with the NSC public Registry, as clearing or non-clearing members, as the case may be;
c)Credit institutions which have concluded an agreement with BCH for the performing of operations in respect of FD transactions guarantee and settlement;
d)Other entities with whom BCH may conclude participation agreements to the Clearing-Settlement System, such as: S.C. Depozitarul Central S.A. (“the Central Depository”), NBR, etc.
The Financial Derivatives Market is the BSE administered futures regulated market.
The Futures Market represents the market segment of the Financial Derivatives Market where futures contracts shall be traded according to BSE established criteria.
Open Position represents the net number of contracts either purchased or sold in a certain FD series, and registered in a certain position account, which were not closed by means of an opposite transaction, by BCH closing upon maturity, or upon their exercising in case of options contracts.
Open positions may be:
a)Long, representing the net purchase position in a certain account and FD series, resulting as a consequence of the concluding of one or several transactions by means of which the number of purchased contracts is higher than the number of sold contracts;
b)Short, representing the net sales position in a certain account and FD series, resulting as a consequence of the concluding of one or several transactions by means of which the number of sold contracts is higher than the number of purchased ones.
Technical provisions are documents issued by BCH regarding the clarification or interpretation of technical and/or operational aspects regarding this regulation and the procedures issued to complete it, as well as regarding the electronic clearing-settlement system.
Daily settlement price / daily SETTLE represents the price set up by BSE according to FD specifications, on the basis of which BCH shall establish the daily rights and obligations that will be cleared in the daily settlement process.
Final settlement price / final SETTLErepresents the price set up by BSE according to FD specifications, used in the process of BCH closing of positions remaining open upon maturity, and on the basis of which BCH shall establish final rights and obligations that need to be cleared in the final settlement process.
First Transaction Day is the first day when a FD series becomes available for trading.
The Clearing-Settlement Program is the daily program approved by the BCH Board for the purpose of carrying out registration, guarantee and clearing-settlement operations in respect of transactions involving FD performed by BCH.
FD Series or Series represents a FD contract, which may be identified in a unique way by means of specifications contained by the respective contract (example: futures contract having BET index as underlying, the multiplier 1 leu and the maturity in June 2007).
The Clearing-Settlement System represents theclearing-settlement system as defined by Art. 168 par. (3) of Law no. 297/2004 and which is administered by BCH.
The Electronic System is the generic term describing the electronic trading system or the electronic clearing-settlement system, as the case may be, used for the carrying out of operations involving FD on the Financial Derivatives Market.
The Electronic Trading System represents the BSE administrated electronic system used for performing exchange orders administration operations and for concluding FD transactions on the Financial Derivatives Market.