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Annexes

Annex 3

MONEY SETTLEMENT ARRANGEMENTS OF CLEARING ORGANISATIONS

The first exhibit in this annex provides quantitative information on average and peak money settlements and margin deposits at each of the individual clearing organisations covered in this study. Following that exhibit are a series of charts providing an overview of the structure of money settlement arrangements for each of the respective clearing organisations. Each chart shows the various institutions or systems involved, starting at the top with the relevant interbank settlement system, the settlement bank(s), the various clearing members, non-clearing members and the clients. The charts are only stylised representations of actual arrangements, which in practice could be much more complicated, in particular if cross-border flows were to be taken into account. The figures in the charts provide a hypothetical example of settlement flows in the domestic currency through the system for the sole purpose of indicating, where appropriate, whether incoming or outgoing flows are typically offset. The numbers are chosen arbitrarily and for illustrative purposes only. They are not meant to reflect the relative size of money flows at the different levels. The fact that the incoming and outgoing flows at the clearing house level normally add up to zero is also accidental and would typically only occur for variation margins in "futures-style" margining systems. In practice, most money settlements include initial as well as variation margin payments, cash payments for option premiums, payments of fees and, in some cases, payments relating to cash deliveries. The total of funds collected by the clearing house can, in practice, differ substantially from the total of funds paid out by the clearing house. The timing of the various funds transfers involved in money settlements - as shown in the charts - is described in detail below the chart in each case. Where possible and relevant the timing of "finality" of the funds transfers is indicated. Final funds transfers are those that are irrevocable and unconditional. It should be noted that the charts relate only to money settlements. In many cases clearing house participants can meet their initial margin calls by posting acceptable types of collateral (e.g. securities) to the clearing organisation. Such transactions would typically be carried out through established securities settlement systems.

Exhibit 1 and the charts described above can be downloaded in PDF format at the following address:

http://www.bis.org/publ/index.htm

Document No.23 under "Committee on Payment and Settlement Systems"

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