Treatment of clearing servicesTreatment of clearing services

Treatment of clearing services

1. If an ADI acting as a clearing member (CM)[20] offers clearing services to clients, its trade exposures to the CCP must be included in its exposure measure by applying the same treatment as for any other type of derivative transaction. Trade exposures to a CCP arise when the ADI is obligated to reimburse the client for any losses suffered due to changes in the value of its transactions in the event that the CCP defaults.[21]
2. If an ADI acting as a CM is not contractually obligated to reimburse the client for any losses suffered in the event that a QCCP defaults, the ADI may exclude the resulting trade exposures to the QCCP from its exposure measure.
3. If a client enters directly into a derivative transaction with a CCP, and an ADI acting as a CM guarantees the performance of the client’s transaction to the CCP, the ADI must calculate its related leverage ratio exposure resulting from the guarantee as a derivative exposure in accordance with paragraphs 17 to 24 of this Attachment, as if it had entered directly into the transaction with the client.
4. If an entity falls within the Level 2 group of the ADI acting as a CM, trades between that entity and the ADI are eliminated in the course of consolidation and the ADI retains an exposure to the CCP. In this case, the transaction with the CCP will be considered proprietary for the ADI acting as a CM, and the exemption set out in paragraph 26 of this Attachment will not apply.
5. If an ADI is providing client clearing services, it may use the approach detailed in Attachment D to APS 180 to calculate the RC and PFE of the exposure to the client. In using this approach, the ADI must only include the portion of initial margin received from the client which is subject to appropriate segregation by the ADI.