Post-trade processing
Rain or shine, you need to be sure that your paper contracts will be honored. Your treasury may also require flexibility in securing financial obligations of contracting parties. This is why we partner with financial institutions to offer SteelHedge users several ways to ensure settlements without straining financial resources.

Post-trade processing is entirely optional. It depends on a hedging transaction, risk profiles of your company and your counterparties and their acceptance by partner financial institutions.

To facilitate trading decisions, we

  • Furnish counterparty risk profiling insights during anonymous communications between registered users;
  • Let pre-authorize (filter) contracting parties along several criteria, including line of business, origin, size, ownership, compliance aspects, traded quantity, etc.;
  • Inform in advance about post-trade processing options available for each potential transaction.

 

Margining

The original paper contract remains in place.

At contract inception, each party transfers to a bank an initial security deposit based on contract terms and historical market volatility.

If the selected price index (spot market) rises or falls beyond the agreed limit, the affected party transfers to the bank an additional security deposit. The consequences of payment default are indicated in the contract.

At contract maturity, the bank transfers the settlement amount to the owed party (if any) and refunds residual security deposits.

Clearing

The original paper contract is novated (replaced) with 2 contracts between each party and a clearing house, which guarantees their performance.

At contract inception, each party transfers to the clearing house an initial security deposit based on its rules and historical market volatility.

If the selected price index (spot market) rises or falls beyond the agreed limit, the affected party transfers to the clearing house an additional security deposit.

At contract maturity, the clearing house transfers the settlement amount to the owed party (if any) and refunds residual security deposits.

Insurance

The original paper contract remains in place.

At contract inception, qualified hedgers may insure each other’s non-payment risk against a one-off insurance premium.

Insurance policies are issued promptly after the conclusion of an insured contract. Each party pays the insurance premium directly to the underwriter.

At contract maturity, if the owing party fails to pay the settlement amount to the owed party, the underwriter indemnifies the latter up to the insured amount.

Opting out

The counterparties accepting mutual performance risk may opt out of post-trade processing at contract inception.

Please refer to Process and Model Contracts for further details.

 

Flexible by design

A hedging system adapting to each transaction

Flexible by design

A hedging system adapting to each transaction

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