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The clearing of the derivative trades taking place in Derivatives Market is carried out by the Athens Derivatives Exchange Clearing House (ADECH).
Specifically, ADECH is responsible for:
Registering all trades
Calculating the margin requirements for each of the investors participating in the market. As a result, each market participant will have to pledge to ADECH either cash amounts or financial instruments, pre-determined by ADECH.
Covering its members or end-clients' unfulfilled obligations.
From the moment that a trade takes place in Derivatives Market, ADECH will carry out the following tasks :
Clearing of the trades
Calculation of the participant's obligations
Settlement of all contracts
The graph below shows the transaction flow between ADECH and two parties of a contract that has taken place in the derivatives market.
As seen above, ADECH acts as counterparty in every transaction taking place in the market. This implies that ADECH is responsible to cover any unfulfilled investor's obligations. However, it is the responsibility of the clearing member to inform ADECH which clients have failed to cover their obligations. ADECH will cover the unfulfilled client's obligations. If after using the client's margin, all client's debts are not covered, then, the member of ADECH will cover this difference (using the existing client's margin pledged to the ADECH).
The clearing cycle of ADECH includes: settlement, clearing and margining. Margining is carried out on an end-client level whereas daily settlement is carried out on a clearing member level.
The following organizations are participating in the whole procedure :
Derivatives Market
ADECH
Central Securities Depository (CSD)
Μargin banks
Settlement bank
Clearing can be described as the process of registration, maintenance of positions, settlement and calculation of margin requirements. The most important role of ADECH is to guarantee the trading in the exchange and act as counterpart on the traded contracts. From the moment that ADECH registers the trades, it becomes the buyer of every end-client who sells and the seller of every end-client who buys.
| Operational Structure
| The participants in the clearing process are the following :
ADECH carries out the clearing by acting as counterparty in all trades that get registered in the derivatives market. ADECH also: (i) calculates all investors' obligations that arise from their participation in this market and (ii) defines the margins to be deposited by the participants.
Members of ADECH represent the end-client on the daily settlement process. They manage the margin accounts of their clients, which are kept in the Margin Bank of their choice. For the purposes of daily settlement members are maintaining settlement accounts in the settlement bank.
Custodian banks which are approved by ADECH are maintaining all the margin accounts of the clients, where margins have to be deposited.
Settlement bank chosen by ADECH maintains all the necessary accounts for the daily settlement.
CSD (Central Securities Depository)maintains all the securities accounts of the clients and ADECH which are necessary for the daily settlement and margining (when stocks will be accepted for margin purposes).
Clients must cover all margin requirements and obligations arising from the daily settlement. Clients, are considered to be physical and legal entities that can execute trades in the derivatives market. Members of ADECH which are at the same time members of Derivatives Market as market makers are considered to be clients.
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