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).
    * Variation Margin, etc. refers to Variation Margin, interests on Variation Margin, coupons and upfront fees.
  • Clearing Participant may deposit Initial Margin, Intraday Margin or Clearing Fund by Substitute Securities in lieu of cash. 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 required amounts of Initial Margin and Intraday Margin are calculated on each business day, and that of Clearing Fund is calculated weekly. 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

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