0692.15.06 - DCS and MCM 1.44e Technical Description Overvie · Exercise style American (Exercisable on any date) and European (Exercisable on the expiry date only) Exercise price

ASX Derivatives Clearing System

DCS and MCM 1.4.4E Technical Description Overview

Version 1.0 – June 2015

ASX Limited DCS OI/MCM 1.4.4E Technical Description Overview

© Copyright 2014 ASX Limited ABN 98 008 624 691. All rights reserved 2014. 2.

Table of Contents

1. INTRODUCTION .............................................................................................................................................. 3

2. TORESS OPTIONS ......................................................................................................................................... 4

2.1. BACKGROUND ........................................................................................................................................... 4 2.2. FUNCTIONAL OVERVIEW ............................................................................................................................ 4

2.2.1. Features of TORESS Options ........................................................................................................ 4 2.2.2. Trading ........................................................................................................................................... 4 2.2.3. Clearing .......................................................................................................................................... 4 2.2.4. Settlement Requirement ................................................................................................................ 5

2.2.4.1. Dividend Settlement ......................................................................................................................................... 5 2.2.4.2. Expiry Settlement ............................................................................................................................................. 5

2.2.5. Specific Cover ................................................................................................................................ 5 2.3. TECHNICAL OVERVIEW .............................................................................................................................. 5

3. ENHANCED PROTECTION............................................................................................................................. 6

3.1. BACKGROUND ........................................................................................................................................... 6 3.2. FUNCTIONAL OVERVIEW ............................................................................................................................ 6 3.3. TECHNICAL OVERVIEW .............................................................................................................................. 6

4. APPENDIX A – TORESS CONTRACT SPECIFICATION ............................................................................... 7

4.1. TORESS LEPOS ..................................................................................................................................... 7 4.2. TORESS ETOS ....................................................................................................................................... 7

5. APPENDIX B – TORESS DATABASE CHANGES ......................................................................................... 9

5.1. DERIVPROD .............................................................................................................................................. 9 5.2. POSTINGCODE........................................................................................................................................ 12 5.3. INTRODUCTION OF NEW MCM DATABASE TABLE ........................................................................................ 13

5.3.1. DividendPayable Table ................................................................................................................ 13

6. APPENDIX C - TORESS OPTIONS - CME SPAN CONFIGURATION ......................................................... 15

7. APPENDIX D – ENHANCED PROTECTION DCS OI CHANGES ................................................................ 16

7.1. METHOD: SENDRESERVEDCASH_V1 ....................................................................................................... 16 7.1.1. Method argument definitions ........................................................................................................ 16 7.1.2. Method to Message Type Cross Reference................................................................................. 16

8. ENHANCED PROTECTION - DATABASE SCHEMA CHANGES ................................................................ 17

8.1.1. CollHeld........................................................................................................................................ 17



1. Introduction

This document describes the contents of MCM/DCS OI v1.4.4E, which consists of changes to DCS/MCM that are required to implement the following two new features:

Total Return Single Stock (TORESS) options

Enhanced Protection

This is an optional release. The ASX supplied MCM 1.4.4E will be made available to Clearing Participants at no additional charge.



2. TORESS Options

This section describes the changes required to support TORESS options.

2.1. Background

TORESS or Total Return Single Stock Options are a new Equity Derivative product to be introduced by ASX in 2015. They are call-only option products that reflect existing Exchange Traded Options (ETO) in all but two aspects:

Dividends paid on the underlying stock will be paid by Option Writer to the Option buyer

All TORESS Options will be cash-settled only

TORESS Options will be available as 1c Low Exercise Price Option’s and 10c or 20c strike Exchange Traded Option’s.

2.2. Functional Overview

2.2.1. Features of TORESS Options

TORESS Options will have a unique ASX Code distinguishing them from existing Exchange Traded Options. The 3rd character of each underlying security will be denoted by an “8” within the 6-character code.

Example:

ANZVQ7 = Exchange Traded Option over ANZ

AN8EU9 = TORESS Option over ANZ

For options currently listed where the first two characters of the stock being the same, the below naming convention could be applied which will ensure that the code remains logical for trading purposes.

Name ETO Underlyer Code TORESS Underlyer Code

Amcor Ltd AMC AM8

AMP Ltd AMP AP8

Ansell Ltd ANN AN8

ANZ Ltd ANZ AZ8

CSL Ltd CSL CS8

CSR Ltd CSR CR8

Origin Energy Ltd ORG OG8

Orica Ltd ORI OR8

Sims Metal Management Ltd SGM SM8

Stockland Ltd SGP SG8

Woolworths Ltd WOW WW8

Woodside Petroleum Ltd WPL WO8

2.2.2. Trading

TORESS Options will trade on ASXTrade under the same grouping and methodology utilised for existing Exchange Traded Options.

2.2.3. Clearing

The Clearing process for TORESS Options will be similar to that of existing Exchange Traded Options with the following exceptions:

TORESS Options will use a zero dividend yield in the option pricing model.



Option writers will be called for dividend payments via the Daily Financial Statement. These will

be passed to Option buyers as part of the normal ASXClear Margin Settlement cycle.

2.2.4. Settlement Requirement

TORESS Options have the requirement for two cash payments as described in the following section.

Name Dividend Settlement

Div Settlement Schedule

Expiry Settlement

Expiry Schedule

TORESS Option Cash P+1 Cash E+1

TORESS LEPO Cash P+1 Cash E+1

2.2.4.1. Dividend Settlement

A feature of TORESS Options is that any ordinary dividends are adjusted via a cash transfer between the option seller and buyer. The buyer is entitled to dividends on the underlying security, settled via cash payment from the Option writer to the Option buyer.

Settlement for all dividend payments made between these two parties will be made in Australian currency (AUD) on a P+1 basis where P is the dividend payment date.

Dividends used to determine the size of any cash settlement will be obtained from the parent underlyer. Cash payments/transfers of the dividend amounts will be made based on the positions on the morning of the ex-date (i.e. after EOD processing on the previous day) regardless of the expiry date (including Options with expiry date between the ex-date and the payment date).

2.2.4.2. Expiry Settlement

A second feature of TORESS Options is that they are cash settled upon exercise as opposed to physically delivered as with standard exchange traded Options. Cash settlement is expected to

initially be on E+1 settlement cycle.

2.2.5. Specific Cover

Rules relating to specific cover for standard Options will also apply to TORESS Options, such that BHP pledged as specific cover can be allocated to both BHP and BH8 options positions.

2.3. Technical Overview

The changes required to support the introduction of TORESS Options are:

CME SPAN Configuration changes for new product families

A change to “DerivProd“ table to include TORESS options related information

A change to “PostingCode” table to introduce new posting codes for TORESS options

A new table “DividednPayable” to be introduced to provide details of the anticipated and actual payments resulting from TORESS Options

Please refer to Appendix B for MCM database schema changes and Appendix C for CME SPAN configuration changes.



3. Enhanced Protection

This section describes the changes required to support Enhanced Protection, which consists of providing support for Account Specific Cash collateral lodgement/withdrawal functionality and reports.

3.1. Background

As a condition of recent ESMA approval, as a recognised qualifying CCP, the RBA is requiring ASX Clear to meet certain account structure criteria under the Financial Stability Standards (FSS).

ASXCL already has in place a segregated account structure for customer ETO positions. ASXCL does not however, allow the Participant to lodge account specific cash, also known as Reserved Cash, in respect of a specific customer account. ASXCL is therefore required to make this cash lodgement facility available to clearing participants (to offer to their clients). Participants are not mandated to offer this facility to their clients (they may opt-in to offer it), and therefore this DCS/MCM release is optional.

3.2. Functional Overview

For Account specific cash, Participants can lodge multiple lodgement/withdrawal instructions during the day. DCS will consolidate the amount and expect the CP to provide that at EOD settlement.

From Collateral Utilisation perspective, at ICA level, first ASC is utilised and then the non-cash collateral is utilised. ASC collateral will not be part of Group Cover. Any unutilised ASC will be attributed as Excess reserved cash for that ICA.

Participant’s margin shortfall will be adjusted by removing the account specific cash from the available cash balance.

3.3. Technical Overview

The changes required to support the introduction of Account specific cash are:

A new DCS OI transaction “SendReservedCash” is added whereby a Participant can nominate an ASC amount for an account.

A new column, “TodaysMove”, is added to the CollHeld Table to save the ASC movement for a business day.

A new collateral type is introduced, “RC”, which will identify ASC for an ICA.

Please refer to appendix D for DCS/MCM OI changes and appendix E for database schema changes.



4. Appendix A – TORESS Contract Specification

4.1. TORESS LEPOs

TORESS LEPO

Underlying security

Any share approved by ASX under guidelines for listing equity options

Security code

The first two characters will denote (map to) the underlying ASX code eg. BH for BHP, the third character will be a set numerical value of 8; the fourth and fifth character is the clearing code which is randomly assigned by the ASX. Some codes will include a sixth numerical character which is also a clearing code randomly assigned by ASX.

Contract size

Usually 100 shares per contract. This may be adjusted for rights, bonus issues and other capital adjustment events. Ordinary dividends will be paid out as cash at t+1 whereby t = the underlying payment date. To be eligible for the dividend you must hold the contract on the last cum date before underlying goes ex. Franking credits will not be available.

Tick size

$0.001 per share = $0.10 (contract size 100 shares) for premium below 1 cent.

$0.005 per share = $0.50 (contract size 1000 shares) for premium of 1 cent or more.

Exercise style European (Exercisable on the expiry date only)

Exercise price 1 cent

Type Call Option only

Contract months Any of the front 6 months and next 2 quarterly expiries.

Expiry date Thursday before last Friday of the settlement month. This may change due to public holidays

Trading hours Normal trading 10.00am to 4.20pm (Sydney time). Late trading 4.20pm to 5.00pm and overseas trading in accordance with the ASX Market Rules

Settlement Cash

4.2. TORESS ETOs

TORESS Flex ETOs

Underlying security

Any share approved by ASX under guidelines for listing equity options

Security code

The first two characters will denote (map to) the underlying ASX code eg. BH for BHP, the third character will be a set numerical value of 8; the fourth and fifth character is the clearing code which is randomly assigned by the ASX. Some codes will include a sixth numerical character which is also a clearing code randomly assigned by ASX.



Contract size

Usually 100 shares per contract. This may be adjusted for rights, bonus issues and other capital adjustment events. Ordinary dividends will be paid out as cash at t+1 whereby t = the underlying payment date. To be eligible for the dividend you must hold the contract on the last cum date before underlying goes ex. Franking credits will not be available.

Tick size

$0.001 per share = $0.10 (contract size 100 shares) for premium below 1 cent.

$0.005 per share = $0.50 (contract size 1000 shares) for premium of 1 cent or more.

Exercise style American (Exercisable on any date) and European (Exercisable on the expiry date only)

Exercise price 10c or 20c for American style; 11c to 19c for European.

Type Call Options only

Contract months Any of the front 6 months and next 2 quarterly expiries.

Expiry date Thursday before last Friday of the settlement month. This may change due to public holidays

Trading hours Normal trading 10.00am to 4.20pm (Sydney time). Late trading 4.20pm to 5.00pm and overseas trading in accordance with the ASX Market Rules

Settlement Cash



5. Appendix B – TORESS Database Changes

The TORESS specific information will be available via the below MCM tables and can be summarised as follows

Table Name

Changes Impact

DerivProd The ‘ProcessFlag’ column which indicates the processing of the contract will contain a new possible value for TORESS Options.

6 – TORESS Options

Clearing vendors that utilise ProcessFlag for settlement reconciliation purposes where the ProcessFlag will be used to distinguish TORESS Options.

DerivProd The column ‘IssCode’ will be used to specify the equity underlying of the TORESS derivative product.

The IssCode can be utilized to identify the link between the TORESS Option and the Equity Underlying. The link will facilitate collateral purposes and dividend information of the equity underlying.

PostingCode The new posting code DIVPY – TORESS Dividends will be introduced for the TORESS Options.

PostingCode - DIVPY

PostingDesc - TORESS Dividends

New posting code used by ASXCL that are associated with ledger postings.

Below section highlights the database tables that have been modified as part of this release. Changes are highlighted in grey

5.1. DerivProd

The DerivProd table contains details of all derivative products cleared by ASXCL.

Index Name Property Number of Fields

DerivProdTypeKey Unique: False 1

Fields: DerivProdType, Ascending

MargGrpKey Unique: False 1

Fields: MargGrp, Ascending

PrimaryKey Unique: True 1

Fields: DerivProd, Ascending

UnderProdKey Unique: False 1

Fields: UnderProd, Ascending



Column Name Description Type Size DerivProd Unique code that identifies the

derivative product. Text 6

DerivProdStat Active or Suspended. Text 1

DerivProdType Code that identifies the type of derivative product.

Text 2

IssCode The equity undelying of the TORESS derivative product

Text 4

SecType Reserved for future use. Text 3

DerivProdDesc Description of the product. Text 60

AllowExer Allow the exercise of positions Yes or No.

Text 1

UnderProd Underlying product code. Text 6

UnderProdType Code that identifies the type of underlying product.

Text 2

DelDays Number of business days in the delivery cycle.

Number (Integer) 2

Cur The currency in which contract prices are quoted.

Text 3

PriceDec Number of decimal places in the contract price.

Number (Byte) 1

StrikeDec Number of decimal places in the strike price.

Number (Byte) 1

TickSize Tick size. Currency 8

TickVal Tick value. Currency 8

CommCur Currency in which give-up commissions are charged.

Text 3

FeeCur Currency in which fees are charged.

Text 3

MargGrp The margin class group to which the derivative product belongs.

Text 5

DelMargRate The margin rate for contracts under delivery.

Currency 8

ShortOptionPerc The minimum short option percentage to be applied.

Currency 8

MinContractCharge The minimum amount to be charged per contract.

Currency 8

PointPercType Quantification of the margin interval as Points or %.

Text 1

MargIntAmt Value of the margin interval. Currency 8

SpotSpread Margin rate used for spot contracts that are offset by other contracts.

Currency 8

NonSpotSpread Margin rate used for non-spot contracts that are offset by other contracts.

Currency 8

SpotType Code that identifies the method used to calculate the start of the spot period.

Text 2



Column Name Description Type Size SpotMonths The number of month’s value

used in the calculation of the start of the spot month.

Number (Integer) 2

SpotDays The number of day’s value used in the calculation of the start of the spot month.

Number (Integer) 2

CondStat Does the product have conditional status Yes or No.

Text 1

DeList Has the product been delisted Yes or No.

Text 1

ContValType Code that identifies the calculation method used to determine the contract value.

Text 2

FeeCategory The fee category used to determine the fees to be charged for the derivative product.

Text 20

ExchId Code that identifies the exchange on which the derivative product is traded.

Number (Long) 4

MinVolatility The minimum volatility used in margin calculations for the derivative product.

Currency 8

PremPaid The premium paid at the time of trade. Includes Yes or No.

Text 1

UnitsPerLot Number of units per contract. Currency 8

Multiplier The multiplier used for contract value calculations.

Currency 8

RSCCCur

DEPRECATED The currency of RSCC swap point cash adjustments.

Text 3

CashSettPrice The price used by the cash settlement process.

Number (Long) 4

CashSettPriceText The cash settlement price formatted for display.

Text 10

Basket Indicates the type of basket. Valid values are:

N = Not a basket

S = Synthetic basket

T = True basket.

Text 1

ManAutoExer Empty Text 1

Initial value = N

DelAllowed Are tenders allowed? Y(es), N(o). Text 1

CashSettle Is this a cash settled contract? Y(es), N(o).

Text 1

DPSUnderProd The underlying product code used by the Derivatives Pricing System.

Text 6

DPSUnderProdType The underlying product type used by the Derivatives Pricing System.

Text 2



Column Name Description Type Size MargAlert For internal use. Currency 8

DPSMarket For internal use Number (long) 4

TradingDec Number of decimal places in the contract price received from the trading system.

Number (byte) 4

Ledger Code used to identify a ledger. Text 12

ProcessFlag Defines the processing of the contract. Can include:

0 – normal derivatives

1 - electricity monthly

2 – electricity calendar

3 - electricity financial

4 – electricity flat quarterly.

6 - TORESS

Number (long) 8

SettDelay The number of days by which the cash settlement is delayed.

Number (long) 8

SubDerivProd1 Used for combination contracts (e.g. electricity annuals) to define the contract into which the combination is split.

Text 6

SubDerivProd2 Used for combination contracts (e.g. electricity flat) to define the second contract into which the combination is split.

Text 6

DelProd The product code used to uniquely identify deliverable commodities

Text 6

DPSDerivProdType The derivative product type used by the Derivatives Pricing System.

Text 2

AllowOTCs Y/N indicates whether OTCs are allowed for this derivative product.

Char 1

5.2. PostingCode

The PostingCode table contains the posting codes used by ASXCL that are associated with ledger postings.



Fields: PostingCode, Ascending



Column Name Description Type Size

PostingCode Code used to identify each type of posting.

Text 6

PostingDesc Description of the type of posting. Text 50

RepSeqNum Number allocated to the particular posting type that is used to determine the sequence in which postings are reported.

Number (Integer)

2

5.3. Introduction of new MCM database table

Following table will be introduced to the MCM database tables

5.3.1. DividendPayable Table

The ‘DividendPayable’ table contains details of the anticipated and actual payments resulting from TORESS Options. Data will be generated on the dividend ex-date and will be posted overnight on the dividend payable date. Note that the dividend value may change between the ex-date and the payable date



Fields: PayableDate, Ascending

AccId, Ascending

DerivProd, Ascending

Multiplier, Ascending

Column Name Description Type Size PayableDate The payable date of the dividend.

Date/Time 8

AccID Uniquely identifies an account. Number (Long) 4

DerivProd Unique code that identifies the derivative product.

Text 6

Multiplier The multiplier used for amount to be paid / received.

Currency 8

Ledger Code used to identify a ledger. Text 12

Prod Code used to uniquely identify the underlying (dividend) product.

Text 6

Cur The currency in which dividend payment is made.

Text 3

Qty The quantity for which the dividend is to be paid / received.

Negative quantity indicates net sell.

Currency 8



Column Name Description Type Size DivVal The dividend value. Currency 8

Amt The amount to be paid / received. Currency 8



6. Appendix C - TORESS Options - CME SPAN Configuration

TORESS Options and the dummy equity underlyings will be created with new SPAN product families but under the same SPAN combined commodity as the standard options. They will therefore be

100% off-settable against standard options and inherit the same SPAN PSR and VSR parameters.

Using BHP as an example, the below table shows the existing and new TORESS product families

that will be within the BHP combined commodity.

Combined Commodity

SPAN Product Family

Description SPAN PF Type

BHP BHP Underlying Stock EQUITY

BHP BHPA American Option OOS (option on equity)

BHP BHPE European Option OOS

BHP BHPL LEPO FUT (Future)

BHP BHPCA OTC American Option OOS

BHP BHPCE OTC European Option OOS

BHP BHPM OTC LEPO FUT

BHP BH8 TORESS dummy Underlying Stock

EQUITY

BHP BH8A TORESS American Option OOS (option on equity)

BHP BH8E TORESS European Option OOS

BHP BH8L TORESS LEPO FUT (Future)

BHP BH8CA TORESS OTC American Option OOS

BHP BH8CE TORESS OTC European Option OOS

BHP BH8M TORESS OTC LEPO FUT

TORESS series definitions in SPAN will not contain any discrete dividends to ensure that SPAN prices them correctly.



7. Appendix D – Enhanced Protection DCS OI Changes

Details of the Open interface changes are outlined below.

7.1. Method: SendReservedCash_V1

MCM will use this new method to send the account specific cash lodgement or withdrawal instruction to DCS.

Message Type – CC

The SendReservedCash_V1 method is used to notify ASXCL of cash to be reserved for use as collateral for a particular account

Sequence Argument In/Out Mandatory Notes

1 as_UserID In Yes

2 al_AccId In Yes

3 as_ActType In Yes

4 as_Cur In Yes

5 ac_Amt In Yes

7.1.1. Method argument definitions

Name Data Type Length Description

as_UserID String 10 The ID of the user that performed the transaction. Note that this parameter is used for reference purposes only and is not validated by the clearing system.

al_AccID Long 4 A unique number assigned to each Account as it is added. The numbering must start at two and be incremented by one.

as_ActType String 1 The activity type for reserved cash lodgements and withdrawals. Valid values are:

L = Lodgement

N = Withdrawal.

as_Cur String 3 Uniquely identifies a currency.

ac_Amt Currency 8 The amount paid/received as a result of the tender. OR

The amount of Reserved Cash to be lodged or withdrawn

7.1.2. Method to Message Type Cross Reference

Method Message Type

SendMsg ActiveX Control

SendReservedCash_V1 RC



8. Appendix E - Enhanced Protection Database schema changes

An existing table “CollHeld” in PA_CCC and PA_MCMC is enhanced to add one column, “TodaysMove”.

“TodaysMove” will store the account specific cash instructions which are lodged during the day from MCM. The value in this column will keep on updating during the day based on account specific cash instructions. This column will be reset to Zero at the end of day and the amount will be adjusted in CollValue column.

A new collateral type is introduced as “Reserved Cash” which can be identified using the identifier “RC”.

Column Name Code Values Description

CollType AC

BG

S

EM

RC

Austraclear

Bank Guarantee

Shares

ETO Margin

Reserved Cash

8.1.1. CollHeld

The CollHeld table contains details of all collateral lodged with ASXCL as at close of business on the previous day.

No Primary Key.

Index and Key Name Property Number of Fields

CollHeldIndex Unique: True 7

Primary: False

IgnoreNulls False

Fields: SegType

GroupLevel

AccID

CoverGrp,

CollType,

LodgeID

IssuerCode.


SegType Code that identifies the segregation type of the account.

Text 1

GroupLevel Y the collateral is lodged for a particular Cover Group or N the collateral is lodged for a particular account.

Text 1

AccID Uniquely identifies an account. Number (Long) 4

CoverGrp If GroupLevel = Y the name of the Cover Group else *#N/A#*.

Text 20




CollType Code that identifies the type of collateral lodged.

Text 2

LodgeID Uniquely identifies the collateral lodgement.

AllowZeroLength = TRUE

Required = FALSE

Text 12

IssuerCode The code used to identify the issuer.

Text 6

LodgeDate Date that the collateral was lodged.

Date/Time 8

CollDetail Any further details used to describe the lodged collateral.

Text 60

UnitCode Currency in which the collateral is denominated or 'Shares' if stock lodgement.

Text 6

Units Face value (or number of shares if specific cover).

Currency 8

CollValue Value assigned to the collateral after any haircut has been applied.

Currency 8

CollUtil Value of the collateral that has been utilised.

Currency 8

ExpiryDate If applicable, the date the lodged collateral ceases to have value.

Date/Time 8

Holder For share lodgements, the name of the registered holder.

Text 180

HIN The holder identification number of the registered holder.

Text 10

Specific ‘Y’ indicates the collateral lodgement is to be treated as specific cover, or else ‘N’.

Text 1

Cur Code used to identify a currency. Text 3

TodaysMove The sum of the units/face value movement resulting from the collateral activity for the current business day.

Currency 8



Disclaimer

This document provides general information only and may be subject to change at any time without notice. ASX Limited (ABN 98 008 624 691) and its related bodies corporate (“ASX”) makes no representation or warranty with respect to the accuracy, reliability or completeness of this information. To the extent permitted by law, ASX and its employees, officers and contractors shall not be liable for any loss or damage arising in any way, including by way of negligence, from or in connection with any information provided or omitted, or from anyone acting or refraining to act in reliance on this information. The information in this document is not a substitute for any relevant operating rules, and in the event of any inconsistency between this document and the operating rules, the operating rules prevail to the extent of the inconsistency.

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Documents

0692.15.06 - DCS and MCM 1.44e Technical Description Overvie · Exercise style American (Exercisable on any date) and European (Exercisable on the expiry date only) Exercise price