Interest Rate SwapCollateral and Payment
Deposit and Return of Initial Margin, Intraday Margin and Clearing Fund and Variation Margin Settlement Method
- Deposit and return of Initial Margin, Intraday Margin and Clearing Fund and payment/receipt of Variation Margin, etc.* between the account of a Clearing Participant and JSCC in Japanese yen are settled through the Bank of Japan financial network system (BOJ-NET).Deposit and return of Initial Margin, Intraday Margin and Clearing Fund in the United States Dollar are settled through a commercial bank.
* Variation Margin, etc. refers to Variation Margin (or Mark-to-Market Difference), interests on Variation Margin (or equivalent amount), coupons and upfront fees. - Clearing Participant may deposit Initial Margin, Intraday Margin or Clearing Fund by Substitute Securities in lieu of cash(JPY/USD). Securities acceptable as Substitute Securities are Japanese Government Bonds (hereinafter “JGB”) and US Treasuries. JGBs are delivered/received via account transfer between the account of a Clearing Participant and the account of JSCC through BOJ’s JGB book-entry system. US Treasuries are delivered/received via account transfer between the account of the local custodian of a Clearing Participant and the account of the local custodian of JSCC by using FED-WIRE.
- The netting process is performed in the processes of returning deposited Initial Margin and receiving/paying Variation Margin, etc.
- The Initial Margin deposit deadline and the Variation Margin, etc. payment deadline for Clearing Participants are 11:00, the Intraday Margin deposit deadline is 15:30 and the Clearing Fund deposit deadline is 14:00. The cutoff time for return request of Initial Margin and Clearing Fund is 10:00 for cash and 11:00 for JGBs.
The requirement amounts of Initial Margin, Intraday Margin and Clearing Fund are calculated on each business day. The mark-to-market values of Substitute Securities are calculated on each business day. If there is any shortfall in the amount of Initial Margin, Intraday Margin or Clearing Fund as a result of calculation of Required Amount and mark-to-market values, the Participant shall deposit margins by respective deposit deadline.
Illustration of Collateral and Fund Settlement
