Certain features of OMX Derivatives Markets' clearing concept make it unique compared to many other clearing organizations. These include:
Direct legal relationship
Not a member-owned clearing organization
End-customer clearing and member clearing
Margins are calculated per clearing account
Settlement and delivery on a net basis
Direct legal relationship In NASDAQ OMX' set-up derivatives trading and clearing are integrated and conducted on an end-customer level, whereby the OMX Derivatives Markets becomes the guarantor in all transactions, i.e. as buyer to the seller and seller to the buyer. All market participants – including end customers – have a direct relationship with OMX Derivatives Markets, and thereby acquire rights and obligations with respect to the clearing organization, and consequently not the original counterparty. Despite this relationship, no end-customers normally participate directly in trading, but are represented by approved exchange and clearing members. The identities of end-customers are anonymous to the clearing organization.
Not a member-owned clearing organization OMX Derivatives Markets is not a member-owned clearing organization. Thus, the clearing concept differs from the traditional member-owned clearing organization, for instance in the manner in which potential counterparty losses are handled.
End-customer clearing and member clearing Within NASDAQ OMX, both end-customer clearing and member clearing is offered, with end-customer clearing at OMX Derivatives Markets and member clearing at EDX London Ltd. In OMX Derivatives Markets’ clearing structure, end-customers have limited counterparty risk towards members through cleared contracts because of the direct relationship between the end-customer and the clearing organization. OMX Derivatives Markets assumes the liabilities involved in a transaction for both the buyer and seller. By doing so, the counterparty risk between market participants is replaced by the single counterparty risk towards OMX Derivatives Markets.
Margins are calculated per clearing account Margins are calculated and collected for all contracts registered on clearing accounts. The end-customer clearing structure sees end-customers’ positions netted on the clearing account. In the member clearing structure, positions are netted at the member level for proprietary and end-customers separately.
Settlement and delivery on a net basis Cash settlement and delivery are carried out on a net basis for both end-customers and members, since all contracts registered on the clearing account are taken into consideration, and, where appropriate, facilitates netting. This in turn considerably reduces the flow of capital and securities upon settlement.
