Amsterdam Exchanges has a central, order-driven market structure. In such a structure it is not possible to select independently one's trading partner, because of the risk involved. For those parties who consider it important to control this risk, this can prove a reason not to make use of the central market. It is therefore in the interests of the trading parties that Amsterdam Exchanges covers this trading partner risk and that, in so doing, it maintains a structure that guarantees the completion of transactions, even under extreme circumstances.
There are two reasons to change to a new clearing structure. Firstly, there is the merger of the options exchange and the stock exchange, during which the members of the Stock Exchange Association made it known that they wished to abolish the association and to divide the capital between the members. The capital included a reserve fund to cover the clearing risk, the 'assessment fund' (omslagfonds). In addition, the Ministry of Finance has decided to have a supervisory framework set up with respect to the equity dealing completion systems of Amsterdam Exchanges. This should avoid system risks and promote the integrity and stability of the stock exchange.
It has therefore been decided to change to a clearing member structure, as already in operation for the AEX Options Clearing. This structure has two advantages: firstly the set up for completing both options trading and stock trading will be the same and secondly, the risk margin will no longer lie with Amsterdam Exchanges, but with the clearing members.
In this connection Amsterdam Exchanges has set minimum capital requirements for clearing members. For Direct Clearing Members, who are only authorised to act as a clearing member for their own activities, the requirement is Dfl 20 million, of which 50% must be own capital. The remainder may comprise outstanding loans. For General Clearing Members, who may also act for other admitted institutions or for their clients, there is a capital requirement of Dfl 50 million, of which 50% must be own capital. The remainder may comprise outstanding loans. These amounts only concern admittance to the AEX Equity Clearing. If admittance to the AEX Options Clearing is also desired, the amounts stated above must be doubled.
The security of the completions is formed by the Clearing Fund, a joint guarantee given by the clearing members, in which they must hold securities during the period in which they fulfil their function. A call can be made on the Clearing Fund in case of a calamity.
In addition, a system will be introduced in the AEX Equity Clearing in which a deposit margin will be calculated based on a certain percentage of the value of positions still open. Since AEX Equity Clearing must remain able to meet its obligations, these percentages will have to be 'crash-proof'.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information contact Raymond Salet, Amsterdam Exchanges AEX Amsterdam: 00 31 20 550 4433 or Paddy Manning, St James Corporate Communications London: 44 171 436 4101.
