Oslo Clearing ASA Self Assessment ESCB-CESR Recommendation

Oslo Clearing will upon material default of a clearing member in the derivatives
segment only, proceed to a "close-out" of its clearing transactions and start
liquidating the margin collateral of the defaulting member. End clients will be treated
in accordance with the clearing model chosen by their clearing representative. Under
the GCM model, where only end client positions are segregated, all end client
positions and collateral held in an omnibus account will be liquidated simultaneously
with the "close-out" process. For the fully segregated model, whereby end clients
have segregated positions and collateral accounts, and have signed an FCA with Oslo
Clearing, Oslo Clearing will initiate a transfer of the end clients to another clearing
member immediately after the material default. In any case, the clearing member is
jointly and severally liable for any loss caused by its end client(s).
The order of priority in the derivatives clearing is given by:
(a) margin collateral posted by the individual investor and clearing member
(b) the participant’s joint and several liable clearing member’s equity capital
and
(c) Oslo Clearing’s own funds
Segregated end clients, with an FCA, are margined individually, and are individually
required to collateralise their margin, implying that Oslo Clearing disposes of a large
margin base.
The own funds of Oslo Clearing will only come to use when all loss reducing
mechanisms described above have been exhausted.
3) the joint default in the equities and derivatives segments
Several clearing members participate in both clearing segments, i.e. equity and
derivatives clearing. In the event of a material default, Oslo Clearing will ensure that
the default procedures and the orderly use of the available resources in each service
is conducted in parallel and independently of each other, until the own funds of Oslo
Clearing are the only remaining resource. The own funds of Oslo Clearing, less the
amount already used to cover losses in the equities clearing, will be used to absorb
any remaining loss on this clearing member, irrespective of which clearing service the
loss is attributable to.
Any surplus from the liquidation in one service will be applied to cover losses in the
other service. Oslo Clearing has the right to realise any available collateral belonging
to the defaulting member, including its contribution to the default fund.
Oslo Clearing is refrained from using non-defaulting clearing member’s contribution to
the Clearing Fund to cover losses from a defaulting member, if the loss is attributable
to derivatives clearing.
Do the CCP's rules prohibit them from being used to cover operating losses from
other CCP activities?
Oslo Clearing is a public limited company, and in accordance with the PLCA, there are
no limitations in using its own funds to cover operating losses, however, such that
Oslo Clearing at all times is subject to the minimum requirements as to capital set out
in the PLCA and the STA.
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