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Cash Settlement Optimization for Nasdaq Members: Streamlined Margin Requirements

The current cash settlement solution for Nasdaq members involves a detailed cash optimization process. Members D through A have specific payment and receipt amounts in SEK. To ensure effective management of initial margins, a single flow per currency is utilized for both cash settlement and margin requirements. Positive cash settlements contribute to covering initial margin needs, while surplus cash collateral acts as a buffer for settlement requirements. The optimized process ensures seamless daily cycles, with defined timelines for margin calls, cash settlements, and credit instructions to maximize cash utilization.

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Cash Settlement Optimization for Nasdaq Members: Streamlined Margin Requirements

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  1. Current solution – Cash settlement Nasdaq • CASH OPTIMIZATION Member D to pay -1900 SEK Member A to receive 2000 SEK Member C to receive 1700 SEK Member B to pay -1500 SEK

  2. Current solution – initial Margin CLIENT01 -1000 SEK CLIENT02 +400 SEK CLIENT03 -800 SEK CLIENT04 -2000 SEK CLIENT05 -1200 SEK CLIENT06 -1600 SEK • Member A

  3. Cash optimization

  4. Cash Optimization CLIENT01 -1000 SEK CLIENT02 +400 SEK Nasdaq CLIENT03 -800 SEK CLIENT04 -2000 SEK CLIENT05 -1200 SEK CLIENT06 -1600 SEK • Member A • Total initial margin + cash settlement: • -3000

  5. Overview • CASH OPTIMIZATION • Use one flow (per currency) for cash settlement and margin • Positive cash settlement is used to cover initial margin requirement • Surplus cash collateral on custody account (in instrument currency) is used to cover cash settlement requirement • Direct debit created (per currency) only if: • there after subtraction of positive cash collateral is still a daily cash settlement requirement (per currency) • there is a total collateral deficit on the account in the base currency • Credit instructions are created for the custody account (with same day value) if there is a total collateral surplus in the base currency after the daily cash settlement is finalized – the credit instruction can include both cash collateral surplus withdrawals and specific call backs of excess cash collateral

  6. Updated Daily cycle • CASH OPTIMIZATION Day 1 Day 2 20:00 CET Daily cash settlement calculation ready 10:30 CET Final end of day margin call 21:30 CET Cash optimization calculation ready 19:45 CET All markets closed 21:00 CET End of day margin requirements ready 09:00 CET Direct debits are sent for daily cash settlement requirements and cash collateral deficits 14:00 CET Credits are sent for positive daily cash settlement and cash collateral surplus

  7. Techincal impact • CASH OPTIMIZATION

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