Customized

• Equity
• Fixed Income

Customized Instruments Clearing

CDCC is expanding its product selection to meet the growth in demand for advanced financial risk management mechanisms for customized financial instruments.

Off-Exchange Trading: Bilateral vs. Central Counterparty (CCP) Model

Bilateral Model: Each counterparty needs to manage as many bilateral relationships as they have counterparties. This implies managing multiple bilateral arrangements and the related risk exposures on a continuing basis.

CCP Model: Counterparties only need to have a relationship with the CCP. When becoming members of the CCP, counterparties are bound by the CCP rules, which serve to replace all bilaterally negotiated arrangements (ex. ISDA agreement).

Central Counterparty Clearing Services for Customized Instruments

CDCC introduced its Converge^® central counterparty clearing services in 2006 with the aim of offering Clearing Members the benefits of central clearing for transactions that originate off-exchange. The result for Clearing Members is a combined register of their standardized listed derivative products and their customized instruments, extending the mitigated risks and reduced costs typically offered by exchange-traded contracts.

Benefits of Using Converge^® to Clear Customized Instruments

• ISDA agreement not required
• Multilateral Netting (Customized and Exchange-Traded)
  • Positions
  • Collateral requirements
  • Daily settlement
  • Final settlement
• Centralized Business Processes
• Anonymity
• Scalability
• Optimal usage of capital and collateral
• Risk Mutualization

Accessing Converge^® Services

Services Only Available to Clearing Members

Only Clearing Members are authorized by CDCC to clear their customized instrument transactions through Converge. Institutional markets participants who are not a member of CDCC can also benefit from the advantages of this service by becoming a client of a Clearing Member.

For more information on CDCC membership standards including its Converge^® services, or to apply for membership, please contact Operations at cdcc-cs@tmx.com.

How it Works

Converge^® is the commercial name for the customized portion of CDCC's clearing application, SOLA^® Clearing, that enables Clearing Members to enter their customized instrument transactions to be processed and cleared by CDCC.

Converge is a secure, easy to access and easy to use customized clearing service. There are no additional system or profile requirements to use Converge. Clearing Members submit their individual trade details into the trade capture screens of Converge, which will match, validate and confirm the transactional details to the submitting Clearing Members. Customized options are reported on the Options Daily Transaction Report (MT01).

On a daily basis, CDCC assigns a price to every customized option position for margining purposes. These prices are reported on the Converge Option Price report (MO12).

Trading Venues

CDCC also aims to expand its Converge^® services from purely bilateral markets to other trading venues, notably Inter-Dealer Brokers (IDB) and Alternative Trading Systems (ATS).