3.2.4 Contract Collateral & Netting preferences

User can define specific preferences for Collateral and Netting if agreements are not used for the contract.

Click the Contract Preferences button to open this screen.

The following table describes the fields captured for Collateral-Netting preferences for a Contract.

* Indicates mandatory fields.

Table 3-6 Contract Collateral & Netting preferences

Field	Description
Module	Displays Treasury Module of the contract.
Contract Currency	Displays the Currency selected for the contract. For contracts where a currency pair or multiple currencies are selected, base currency selected for the contract is considered as the contract currency
User Reference	Displays User Reference number of the Contract for which the Collateral-Netting preferences are being captured.
Version	Displays current Version of the contract.
Collateral Party	Displays the Party with whom the collateral is exchanged for the contract, as selected in the Linked Entities sub system.
Netting Party	Displays the Party with whom the main components of the contract are net settled, as selected in the Linked Entities sub system.
Margin Preferences	Group of fields to capture the preferences to be used for collateral margining for the contract. Applicable only if Collateral Required is checked and collateral party is selected for the contract in Linked entities sub system
Cash & Deposit	Indicate whether collateral can be provided in Cash or Deposits, for this margin code. Defaulted from the deal product of the contract and is checked by default, if not defined for the deal product If unchecked after authorization, any cash collateral exchanged earlier will not be automatically returned and should be operationally handled
Securities	Indicate whether collateral can be provided as Securities, for this margin code. Defaulted from the deal product of the contract and is checked by default, if not defined for the deal product If unchecked after authorization, any securities collateral exchanged earlier will not be automatically returned and should be operationally handled
Margin Calculation	Select the reference to be used for calculating margin required for the contract. If ‘Instrument’ is selected, then calculation preferences defined for the instrument product is used If ‘External’ is selected, then margin calculation is received from an external system or provider If not specified, this field is set to ‘External’ by default
Calculation Agent	Select the party that is responsible for margin calculation for this contract. Can select ‘Bank’ if bank is responsible for margin calculation Can select ‘Counterparty’ if counterparty is responsible for margin calculation Can select ‘Joint’, if both parties are jointly responsible for margin calculation and must agree on the margin calculated Can select ‘Clearing House / CCP’, if a clearing house / ccp is responsible for margin calculation Applicable only if Clearing House / CCP is selected for the contract in Linked Entities subsystem Can select 'Third Party', if a third party is responsible for margin calculation ‘Third Party’ can be a calculation service provider, regulator, etc. If not specified, this field is set to ‘Counterparty’ by default
Third-Party Calculator	Select the third-party calculator that is responsible for margin calculation for this contract. This field is applicable and mandatory only when the Margin Calculation Agent selected is ‘Third Party’ Can be one of the Third-Party Calculators maintained using ‘Treasury Static Type Maintenance’ function with type as ‘MARGIN_TPC’ Example: ISDA, etc
Collateral Reuse Allowed	Indicate whether the collateral received for this margin code can be reused for settling or repledging for other contracts or margins, by the receiver of the collateral. This field cannot be amended after first authorization of the contract If ‘Collateral Method’ selected is ‘TTCA’ or ‘SIUR’, then this field is checked by default and cannot be changed If ‘Collateral Method’ selected is ‘SICA’, then this field is unchecked by default and cannot be changed If ‘Collateral Method’ is selected is none of the above or not specified, then this field is defaulted from the deal product of the contract and unchecked by default, if not defined for the deal product. However, user is allowed to change
Net Settle Collateral	Indicate whether the collateral exchanged for this contract can be net settled with other margins or components or contracts with the same party. Defaulted from the deal product of the contract and is unchecked by default, if not defined for the deal product
Cash Collateral	Group of fields to capture the preferences to be used for cash collateral for the contract. Applicable only if Cash & Deposits is checked for the margin preferences
Margin Currency	Select the currency in which the margin required is calculated for this contract. Set to contract currency by default If the Margin Currency is different from the Contract Currency, then for the purposes of calculating the margin required (or available), the exposure is converted into margin currency equivalent, using the prevailing FX rates, as configured for the Margin Scheme (if selected) or for the Margin Product (if margin scheme is not selected) If amended after authorization, any cash collateral exchanged earlier will not be automatically returned and should be operationally handled
IM Account	Select the cash margin account, with the collateral party, in which the cash collateral exchanged as Initial Margin is tracked for the contract Account currency is same as the Margin currency selected Interest is calculated on this cash collateral according to the configuration in the margin account Defaulted from the Initial Margin accounts maintained for the collateral party for the margin currency If amended after authorization, any cash collateral exchanged earlier will not be automatically returned and should be operationally handled
VM Account	Select the cash margin account, with the collateral party, in which the cash collateral exchanged as Variation Margin is tracked for the contract Account currency is same as the Margin currency selected Interest is calculated on this cash collateral according to the configuration in the margin account Defaulted from the Variation Margin accounts maintained for the collateral party for the margin currency If amended after authorization, any cash collateral exchanged earlier will not be automatically returned and should be operationally handled
Margin Scheme	Select the margin scheme through which the cash collateral is exchanged for the contract. If the Scheme Currency is different from the Margin Currency, then the cash collateral amount to be exchanged is converted into Scheme Currency equivalent, using the prevailing FX rates, as configured for the Margin Scheme Defaulted from the Scheme to which the Variation Margin account is linked
Securities Collateral	Group of fields to capture the preferences to be used for securities collateral for the contract. Applicable only if Securities is checked for the margin preferences
General Collateral	Indicate whether the securities can be assigned from a general collateral pool of eligible securities provided by the pledgor, for this contract This field cannot be amended after first authorization of the contract If checked, then the securities are assigned, at the end of the day, to the extent of the margin required for the contract Need not assign any specific securities, while booking the contract If unchecked, then specific securities should be assigned separately while booking the contract Defaulted from the deal product of the contract and unchecked by default, if not defined for the deal product
Deliveries By Value	Indicate whether the securities can be assigned by the Triparty Agent/Third party from a general collateral pool of eligible securities provided by the pledgor, for this contract This field cannot be amended after first authorization of the contract If checked, then the collateral securities assigned by the Third-party custodian at the end of the day, automatically returns at the beginning of the next day If unchecked, then collateral assigned will not be automatically returned the next day Defaulted from the deal product of the contract and unchecked by default, if not defined for the deal product
Collateral Method	Select the method applied for transferring securities collateral. This field cannot be amended after first authorization of the contract Can be “Title Transfer financial Collateral Arrangement (TTCA)” indicates that the ownership of the securities provided as collateral are fully transferred to the receiver hence appears in the books of the receiver as asset receiver, as holder of the securities, is entitled to collect the coupon and cannot be claimed by the pledgor securities provided as collateral can be reused or repledged by the receiver, as ownership is fully transferred Can be “Security financial Collateral Arrangement (SICA)” indicates that the ownership of the securities provided as collateral continues to be with the pledgor hence appears in the books of the pledgor as asset receiver, as holder of the securities, is entitled to collect the coupon. However, coupon is claimed by the pledgor from the receiver securities provided as collateral cannot be reused or repledged by the receiver Can be “Security financial Collateral Arrangement with right-of-use (SIUR)” Same as SICA In addition, the receiver has the “right to reuse” the securities provided as collateral (according to agreed terms) When the receiver exercises the right to reuse, the ownership of these securities are considered as fully transferred and appears as asset in the books of the receiver (and not in the books of the pledgor) Defaulted from the deal product of the contract Defaulted from the deal product of the contract
Maximum Distinct Securities	Enter the maximum number distinct securities that can be provided as collateral, for this contract Defaulted from the deal product of the contract If not specified, then any number of different securities can be provided as collateral
Generate Dvp/Rvp	Indicate whether Dvp/Rvp messages (where applicable) should be generated for securities collateral transfer, for this contract If checked, then DVP/RVP messages are generated for initial margin transfer during booking and liquidation the contract Example: Securities collateral transferred while booking a Repo contract If unchecked, then Deliver Free / Receive Free messages are generated for initial margin transfer during booking and liquidation of the contract During independent margin calls, always Deliver Free / Receive Free messages are generated, irrespective of whether this field is checked or not If ‘Deliveries By Value’ is checked and this field is checked, then DVP/RVP messages are generated for both collateral transfer before EOD and automatic return during BOD Defaulted from the deal product of the contract and is unchecked by default, if not defined for the deal product
Claim Coupon from CP	Indicate whether coupon on securities transferred as collateral, for this contract, to be claimed (where applicable) from collateral party. Applicable only if collateral method selected is ‘SICA’ or ‘SIUR’ If checked, then coupon is claimed from the receiver of the securities collateral If unchecked, then coupon cannot be claimed from the receiver of the securities collateral Defaulted from the deal product of the contract and is unchecked by default, if not defined for the deal product
MT54x For Rate Revision	Indicate whether Securities Delivery messages should be regenerated (and sent), for this contract, when the Interest Rate for the parent (Repo) contract is revised. If checked, then a ‘CANC’ MT54x message with the old rate and ‘NEW’ MT54x message with the new rate (for the Repo) is generated for all the Securities provided as collateral, for every Rate revision of the parent contract If unchecked, then MT54x message is not generated for Rate revision of the parent contract Defaulted from the deal product of the contract and is unchecked by default, if not defined for the deal product
Cash Netting	Group of fields to capture the preferences to be used for netting cash components of the contract. Applicable only if Netting required is checked and Netting party is selected for the contract
Net Cash	Select the preference for netting cash components of the contract. This field cannot be amended after first authorization of the contract If ‘Net’ is selected, then both cashflows paid and received are netted together, for the same component across multiple transactions linked to the same cash netting scheme If ‘Aggregate’ is selected, then cashflows paid are netted and cashflows received are netted separately, for the same component across multiple transactions linked to the same cash netting scheme If not selected (‘’), then cashflows of the contract are not netted for the components linked to the agreement Defaulted from the deal product of the contract and not selected by default, if not defined for the deal product
Netting Tenor	Select the preference for netting cash components of the contract with other transactions with the same counter party, having any tenor or same tenor. Applicable only if Net Cash selected is ‘Net’ or ‘Aggregate’ If ‘All’ is selected, then the cash components of this contract is netted with transactions having any tenor If ‘Same Tenor’ is selected, then the cash components of this contract is netted only with transactions having same tenor If ‘Same Deal’ is selected, then only cash components of this contract is netted Defaulted from the deal product of the contract, and ‘All’ is set by default, if not defined for the deal product
FX Netting Type	Select the preference for netting cash components of the contract with other transactions with the same counter party, Pair-wise or Currency-wise. Applicable only if the contract is a FX contract and Net Cash selected is ‘Net’ or ‘Aggregate’ If ‘Pair-Wise’ is selected, then cash flows of this contract are netted with only those FX transactions, with the same counter party and traded with the same currency pair If ‘Currency-Wise’ is selected, then cash flows of this contract are netted with cash flows in the same currency for other FX transactions with the same counter party, even if they are not booked with the same currency pair For contracts belonging to other modules. ‘Currency-Wise’ are set by default and cannot be changed Defaulted from the deal product of the contract, and ‘Currency-Wise’ are set by default, if not defined for the deal product
Netting Scheme	Select the settlement scheme to be used for netting cash components of this contract. All cashflows across contracts linked to the same settlement scheme are netted together, based on Net Cash, Netting Tenor and FX Netting Type preferences Defaulted to the Scheme defined for the counterparty for the contract currency
Securities Netting	Group of fields to capture the preferences to be used for netting securities transferred for the contract Applicable only if Netting required is checked and Netting party is selected for the contract
Net Securities	Select the preference for netting securities for the contract. This field cannot be amended after first authorization of the contract If ‘Net’ is selected, then both securities delivered and received are netted together, across multiple transactions linked with the same counter party If ‘Aggregate’ is selected, then securities delivered are netted and securities received are netted separately, across multiple transactions with the same counter party If not selected (“), then securities for the contract are not netted Defaulted from the deal product of the contract and not selected by default, if not defined for the deal product
Netting Tenor	Select the preference for netting securities for the contract with other transactions having any tenor or same tenor. Applicable only if Net Securities selected is ‘Net’ or ‘Aggregate’ If ‘All’ is selected, then securities for this contract are netted with transactions having any tenor If ‘Same Tenor’ is selected, then securities for this contract are netted only with transactions having same tenor If ‘Same Deal’ is selected, then only securities for this contract are netted Defaulted from the deal product of the contract, and ‘All’ is set by default, if not defined for the deal product
Netting Level	Select the preference for netting securities for the contract with other transactions having same SK Location, Clearing House or Position/Basket. Applicable only if Net Securities selected is ‘Net’ or ‘Aggregate’ If ‘SK Location’ is selected, then securities for this contract are netted with transactions settled through the same SK Location If ‘Clearing House’ is selected, then securities for this contract are netted with transactions settled through the same Clearing House If ‘Position/Basket’ is selected, then securities for this contract are netted only with transactions belonging to the same Position or Basket Defaulted from the deal product of the contract, and ‘SK Location’ is set by default, if not defined for the deal product