Central counterparty clearing involves: 1) Accepting and clearing trades of interest rates, credit derivatives, and foreign exchanges. 2) Monitoring trades, calculating initial and variation margin requirements, and managing collateral and limits. 3) Handling exceptions such as breached limits through actions like margin calls, reducing positions, revoking limits, or closing out trades.

1. CENTRAL COUNTERPARTY CLEARING
Intermediation Service Model
Products Interest Rates, Credit Derivatives & Foreign Exchange
Appetite CounterParty Assessment Credit/Market Documentation
Technology Solution
Limits
Trade Trade Acceptance Take Up Clearing Process
Control Trade Monitoring Risk Control Collateral Management
Margin Initial Margin Variation Margin Calculation Method
Exception Exception Process Limit Breach Margin Call

2. CENTRAL COUNTERPARTY CLEARING
Execution Broker
Client Original Deal
Affirmation
Matching /
(EB)
Trade Processing
Platform eg. MarkitWire,
Clearnet, ICE, CLS
Client Electronic EB sends
Trade Acceptance Process
Confirms Messaging Trade
Trade Service Notification
Allege
Brokerage Desk/
House Trade
Rejected
Check Acceptable Trade Terms
in line with agreement & clearable
products etc
Perform
Pre Trade Calculate initial margin required
Check
Check Client and EB Limits
Give Up / Take Up
Check trade request in line with
policy / risk appetite
Accept/Reject Credit
Decision Reject
Referral
RM contacts
Credit
Take Up Trade
Accept
Credit Credit RM/Sales
evaluates Credit
Book Trade Approved Review
request Reject
- CARM
Post additional
collateral,
Trade
extend limit
Booking

3. CENTRAL COUNTERPARTY CLEARING
Client If intra day
Client Initial Onboarded Limits setup Monitor trade
movement
portfolio Control with agreed in systems with initial
breaches limit,
limits margin calc
escalate to Credit
Trade Monitoring and Control Process
Additional margin
Ongoing EOD Assess total Check margin called or collateral
Check
Monitoring position EOD margin maintained, else posted as
available limit
valuation requirement make call necessitated, limits
updated in systems
Calc Match &
reconcile Collateral posted and
margin updated in systems
limits and
apply manual
Intra Day updates to
exposure unmatched
limits
Total of intra day Market pricing
adverse variance Real time intra day
of client portfolio MTM valuation of Update collateral
Limit margin client portfolio
breached requirement position and Update limits
monitored with scenario analysis
legal entity limit Margin Calc
Exception
management
Limit Calc % of
Issue alert to
Maintained limit
Risk, Credit,
exhausted
Sales/RM
and scenario
PFE margin
maintained

4. CENTRAL COUNTERPARTY CLEARING
Receive collateral Reconcile Receive new Port trade details into Margin Call for
and limit balance client trade Obtain margin
balance with CCP Margin Tool and trade – 100%
Initial Margin
feed overnight from notification requirement
CCP system calculate initial margin EOD T+0
systems
If significant time
elapsed between allege Confirm
and check, and volatility margin
high given portfolio size, received SOD
revalue trade prior to T+1
margin calc
Receive collateral Reconcile Review existing Aggregate Compare MTM
and limit balance Surplus
balance with client portfolio deltas of client with existing Hold
feed overnight from margin
CCP system positions portfolio margin
systems
Variation Margin
Notify
Margin Credit,
Intra Day
deficit Collateral,
Risk, Sales
EOD
Notification
Client
Receive received from Update
agrees to
margin Finance of systems
margin call
payment
Notify Sales, Make margin call to Client does Credit
Client, Credit, client – 100% EOD Exception
not agree to referral
Collateral, Risk T+0, for T+1 SOD management
margin call

5. CENTRAL COUNTERPARTY CLEARING
Confirm
Notify Sales,
Identify breach Valuation & variation Agreement
client, credit,
of limit margin calc margin limit reached
risk, collateral
breached
and agree
method of
Limit Breach
Check action
against trading
and LE limit
Inform client to Inform client to
post additional reduce
collateral positions
No agreement
Positions reduced
Collateral posted,
Closeout with new trade,
update systems &
action notify all & update
notify all
systems
Inform Sales,
Event
Credit, Inform Legal Instruct Revoke credit
decision to
Collateral, Client and notice to client to be limits
revoke limits /
Exception / Revocation
Risk, PB of EB client closed out
closeout
event
12.5 Closeout Update
positions as systems &
agreed - records
Summit
Deduct fees Settle
from account
collateral
Legal procedure Identify Net/Setoff
Margin against other Return
to recover margin
deficit obligations surplus
realised losses surplus
to Bank