SIS x-clear AG

ABPs have not concluded a contract with SIX SIS, but use the account of an SIX SIS business partner.

Revised version of the Basel Capital Accord of 1988 (regulations stipulated by the Basel Committee on Banking Supervision entitled International convergence of capital measurement and capital standards). The agreement contains – within the framework of capital adequacy regulation and in connection with the assessment of risk – a number of review procedures as basis for capital calculations. Furthermore, the supervisory process strengthens individualised, qualitative supervision. The third part is on market discipline: Detailed transparency rules are intended to cause a regulatory reaction of the market.
The three pillars of Basel II are:

• Minimum capital requirements: credit risk, market risk, operational risk
• Supervisory review process: flexibility with respect to bank-internal solutions
• Promotion of market discipline: transparency, self-discipline due to disclosure

Reference parameter, e.g. a share index or a representative bond price or yield, used to help gauge the performance of an investment or a portfolio.

Shares of companies of prime borrower standing with strong earning power, favourable growth prospects and a high rating.

Possibility to select the preferred option among several given options in connection with corporate actions/special actions. Buyer elections occur for purchasers on open transactions with SIX x-clear Ltd as seller (see also Voluntary corporate actions/Mandatory corporate actions with options).

To stock up" on securities (> securities purchase); mandatory purchase

Upper limit; caps (and floors) may serve, for example, as a protection against increasing (or falling) interest rates in case of investments. In the long term, the cap purchaser is protected by an upper interest limit (against payment of a premium), i.e. the interest due from the interest business does not exceed a predetermined upper limit (strike) during the term of the cap.

Legal entity that acts as an intermediary between the parties to a securities trade and is the seller to every buyer and the buyer to every seller. The counterparty risk of the trading parties is transferred to the CCP, which normally guarantees that both counterparties to a transaction remain anonymous.

The core competency of a CSD is the centralised settlement of securities transactions and the collective safecustody of securities.

Mutual clearance and evaluation on both the security and money side of securities transactions effected on the stock exchange. Collateral is simultaneously demanded by a Central Counterparty. As a result, only the balance(s) of each trading partner need(s) to be credited or debited respectively. This procedure not only facilitates the technical settlement of securities trades, but also reduces the number of bookings to a minimum.

Open positions of an SIX x-clear member are recorded in clearing accounts.

Mutual netting due to the extraordinary termination of a trading relationship.

Security; serves to reduce the risk.

Collateral money accounts or collateral custody accounts.

Risk that the trading partner is defaulting due to insolvency, resulting in a loss.

Credit worthiness indicator taking into account how solvent a company (creditor) and how secure a money claim is. Specialised companies (rating agencies) "measure the credit solvency" of a company or public corporation, applying standardised criteria.
See also Rating.

Failure to meet a contractual obligation. The provisions of SIX Swiss Exchange, SIX Swiss Exchange Europe and SIX x-clear determine under which circumstances a contractual obligation is deemed a default.

The purpose of this fund at SIX x-clear Ltd is to provide security (money or securities) against unpredictable risks and losses such as systemic risks (domino effect).

Security provisions: Apart from initial margin, variation margin and default fund, SIX x-clear has other means to absorb losses.

Corporate actions with a choice of options; examples are takeover offers, repurchase offers and rights issues/capital increases. Elective corporate events that have not yet been settled allow for buyer elections. The exact procedure depends on whether the corporate action is a Voluntary corporate action or Mandatory corporate action with options.

Brussels-based clearing organisation for Eurobonds, created by Morgan Guaranty Trust Co. New York in 1968. Euroclear is today a system for domestic and international securities transactions, covering bonds, equities and investment funds. In addition to its role as an international central securities depositary (ICSD), Euroclear also acts as the central securities depository (CSD) for Dutch, French, Irish and UK securities.

Euroclear UK and Ireland Limited is the central securities depository for the UK market and Irish equities. It provides real-time settlement for a wide range of corporate and government securities, including those traded on the London and Irish Stock Exchanges and on SIX Swiss Exchange Europe.

Euroclear UK & Ireland Limited operates the real-time settlement system CREST, launched in 1996, for British, Irish and international equities and government bonds.

Lower limit, e.g. guaranteed minimum interest rate for investments.
See also Cap.

Stock exchange member that is entitled to clear its own trades, the trades of its customers as well as trades of stock exchange participants without a clearing license (NCM).

Margin or difference between the actual market value of a security and the lending value (value as collateral).

Stock exchange member that is entitled to clear its own trades and those of its clients. These trades include group-internal transactions effected for affiliated companies provided that the member is fully consolidated within the group and that the other affiliated companies have no securities dealer licence and/or no admission to listing on the stock exchange.

Margin to be deposited for absorbing daily losses. It is used in cases where the variation margin, which is calculated several times a day, cannot balance such losses.

ICSDs settle transactions in international as well as certain local markets, mainly by means of a direct or indirect (via local banks) link to CSDs.

Subsidiary of the British LCH.Clearnet Group, which is subject to the supervision of the Financial Services Authority (FSA) and acts as Central Counterparty to the following exchanges: IPE (International Petroleum Exchange), LIFFE (London International Financial Futures Exchange), LME (London Metal Exchange) and LSE (London Stock Exchange) as well as virt-x.

Extent to which collateral is considered as a loan to secure a credit. The lending limit is the relative value of lending-eligible collateral that the lender is willing to consider (as a maximum) as cover for a credit.

Stock exchange trades that are forwarded electronically from a trading platform to a settlement system without any modification of the trade details being possible. No manual intervention is possible between conclusion of the trade and its settlement.

With respect to distributions on open transactions, two types of corporate actions are distinguished: Mandatory corporate actions and Mandatory corporate actions with options (Elective corporate events). For mandatory corporate actions, compensations are – on a mandatory basis – automatically claimed and executed in accordance with local market rules, e.g. for cash dividends or bonus shares.

Mandatory corporate actions with options involve execution of the default option without any intervention by the shareholder. The shareholder may, however, demand that a different option be chosen. The shareholder is informed of the default option by SIX Swiss Exchange Europe and/or SIX x-clear before the event is processed. Within mandatory corporate actions with options, two types are distinguished: distributions and reorganisations. Distributions include stock dividends or schemes of arrangement whereas reorganisations include call payments, subscriptions of rights as well as certain schemes of arrangements. Buyer elections only occur in connection with reorganisations, but not with distributions.

Compensations in Euroclear involving sellers who have not yet received the compensations they are to deliver to the buyer. These compensations are settled manually between the seller and the buyer (i.e. outside the system).

Collateralisation.

Obligation to increase the margin securities: If margin requirements exceed the collateral value, a margin call is automatically triggered in real time to settle the difference.

Daily revaluation of net positions based on exchange rates and market developments (for the calculation of daily profits of losses on the respective position).

Netting of trading obligations, e.g. due to a securities trade, effected by a Central Counterparty. Due to the netting of securities deliveries and payment obligations, the number of settlement transactions is reduced.

Total position of an SIX x-clear member; result of netted buy and sell positions.

Stock exchange participant that is not a member of SIX x-clear Ltd, but can participate in clearing via a GCM.

All unsettled trades on a member's clearing account are summarised per ISIN and transaction currency into one position called "open position".

Individual contracts concluded between SIX x-clear Ltd and the member ensuing Open offers or contracts concluded due to off-order-book trades that are not yet due or not yet settled.

SIX x-clear Ltd offers to step, as Central Counterparty, into a trade that results from stock exchange orders matched at SIX Swiss Exchange Europe or SIX Swiss Exchange between members or NCMs respectively.

Electronic system that forwards buy and sell orders due to defined rules to certain trading partners, settlement organisations and central counterparties.

Anonymity of the trading partners is ensured by the Central Counterparty; the clearing house occupies an intermediary position between the trading parties.

Right to secure a claim in third-party property (pawn, pledged property).

Standardised evaluation of the credit solvency of creditors, companies, banks or countries or of the securities issued by these entities by specialised agencies (e.g. Moody's, Standard & Poor's, Fitch). Ratings can also be conducted bank-internally.

In connection with securities trading, the matching of two stock exchange orders that are eligible for execution.

Identification, quantification and risk controls as a service to minimise risk by applying various instruments.

With the risk buckets, the securities outstanding at SIX x-clear are divided into different risk categories. Depending on the Value at Risk (VaR) and correspondingly on the market risk of a clearing-eligible security, such security will be allocated to a specific risk bucket. For securities in the same bucket, the same percentage rate is applied to the initial margin to be provided. More risky securities are allocated to higher risk buckets and therefore require higher collateral as security.

A default value of 1.0, provided that the minimum rating of the SIX x-clear member is A-, which may be increased in case of a lower rating. The coefficient has an impact on the total margin amount.

The Settlement Communication System (former SEGA Communication System) is a technological platform for the settlement of domestic and international securities trades. SECOM is one of the few systems that enable the real-time settlement of transactions and is linked to other systems (e.g. SIX Swiss Exchange and Swiss Interbank Clearing).

Securities lending and borrowing for a determined or non determined period against receipt/payment of a certain amount for the provision of securities.

Settlement refers to the conclusion of securities transactions.

Netting of delivery and payment obligations.
See also Close-out netting, Netting

Splitting up a net transaction into smaller net transactions if the cash amount of the original transaction has exceeded a certain limit. Shaping simplifies the processing of payments.

The pan-European blue chip exchange has been operational since 25 June 2001 under the name virt-x and was renamed SWX Europe Limited as of 3 March 2008. Apart from Swiss blue chips, approximately 600 European blue chips from fifteen European countries are traded at SIX Swiss Exchange Europe. The Swiss Value Chain (SIX Swiss Exchange, SIX SIS, SIC/euroSIC) guarantees the settlement of SIX Swiss Exchange Europe trades. The settlement structure for SIX Swiss Exchange Europe is integrated in a trade routing system developed by SIX SIS. Within seconds, trades are automatically forwarded as so-called locked-in trades to the system of SIX SIS. SECOM forwards instructions in line with clients’ specifications to the preferred settlement organisation (SIX SIS, Euroclear UK & Ireland Limited or Euroclear).

Swiss trading platform for equities of mid and small cap segments. Furthermore, the SIX Swiss Exchange platform supports trading in bonds (Swiss franc bonds and Eurobonds), traditional investment funds, Exchange Traded Funds (ETFs, so-called exchange traded index funds) as well as certificated derivatives. Compared to the trading turnover, SIX Swiss Exchange operates the largest market segment for listed and exchange traded warrants in Europe.

Whereas shaping is oriented towards the cash amount involved in a transaction, splitting refers to the availability of securities on settlement day. Splitting is a prerequisite for buyer elections on partial holdings of a transaction. It may facilitate the splitting of securities deliveries. The split order is usually entered by a delivering party with insufficient securities holdings.

Supervisory and executive authority for the Banking Law and the Law on Investment Trusts, active since 1935 and appointed by the Federal Council. It acts independently of the Federal Administration and the Swiss National Bank.

Network of SIX SIS (SECOM), the Swiss National Bank (SIC) and the Swiss stock exchange (SIX Swiss Exchange).

The total of all margin requirements = initial margin x risk coefficient + variation margin

Additional means requested to maintain the margin (see Initial margin). At the end of and during trade date, the evaluation of the various open positions is effected on the basis of their daily settlement price and the difference between this price and the closing value of these positions at the end of the previous trading day or current market prices respectively. Depending on whether a profit or loss is obtained, this results in a debit or credit. The variation margin is calculated on the basis of the mark-to-market valuation of the net positions of all open contracts per security held by the member.

The pan-European blue chip exchange virt-x was renamed SWX Europe Limited as of 3.3.2008.

Voluntary corporate actions are corporate actions, for which shareholders need to become active themselves, provided they have holdings of the securities concerned. The most important types are takeover bids and voluntary conversions/redemptions. Buyer elections are possible for voluntary corporate actions.