The new holding company for the unified Central Counterparty in Austria – CCP Austria Abwicklungsstelle fur Borsengeschafte GmbH (CCP.A) – will go live on 31 January 2005. The CCP is equally owned by the Vienna Stock Exchange (VSE) and the Austrian CSD, Osterreichische Kontrollbank (OeKB). At present, OeKB performs clearing for cash market trades, while VSE clears derivative trades. With the introduction of the new CCP, a single central counterparty will be in charge of clearing both markets. No technical changes are planned as CCP.A will operate the existing systems currently used by OeKB and VSE, but the company has announced that it will implement a second batch cycle for the clearing of cash market trades in 2005 and that it is also working on a securities lending service.
CCP.A is also going to introduce new default procedures. Currently, in case of a non-delivery, the failing transaction is removed from the netted process on SD+3 after the clearing batch in order to be settled in the OTC environment. The procedure stipulates the start of a buy-in on S+1 or S+2 which is initiated by OeKB. In case the buy-in fails, the removal process is performed on S+3 and the failing portion of the net trade has to be settled separately on the OTC market between the different parties. In future, procedure will not stipulate a mandatory buy-in. If the failing party requests a buy-in, it has to instruct CCP.A accordingly. CCP.A will then try to buy-in the assets. If there is no buy-in and the timely delivery of assets fails (S+10), a cash settlement on S+10 will be performed. This cash settlement amount will be 20% of the original trade price or the closing price on S+10, whichever is higher.
The new CCP.A combines the collateral management functions of both the cash and the derivatives markets. There is also a harmonisation of eligible assets which may be used as collateral. The calculation of the collateral will not change, with the exception of those participants whose credit standing does not reach a certain level within the internal rating process of the CCP.A. “This internal credit rating and the resulting level of required collateral are additional features of a stricter risk control in the Austrian market,” says a spokesman for Bank Austria Creditanstalt (BA-CA) in Vienna. “Apart from the rating process, another new feature will be implemented: The so-called “Solidarfonds” – which is a compensation fund to which all participants have to contribute, depending on their function in the market. For example, participants who are only active as a Direct Clearing Member (DCM) on the cash market will have to contribute Euros 50,000 to this fund, whereas General Clearing Members (GCM) on the Derivatives Market will have to contribute Euros 5,000,000. The main difference to the current model is the risk limitation of the market to the maximum amount of the amount paid into the “Solidarfonds”. Currently, the obligation is limited to the collateral for all open trades.”