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Collateral Requirement Reduction Proposal Update

Update on Mod.04-19 raising concern about increased collateral requirement on non-working days during holidays. Options investigated and participants' views sought for next steps. Meeting 93 in August. Thanks to Katia and Chris.

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Collateral Requirement Reduction Proposal Update

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  1. Mod 04-19 Update June 19 Modifications Committee meeting Andrew Burke & David Gascon

  2. Background • Mod 04_ 19 was raised at Meeting 89 on Feb 20th 2019 • The aim is to reduce the collateral requirement on participants, who currently have to post collateral to cover 5 days on a Christmas or Easter period, when there are 4 consecutive non working days. • The issue is due to the Traded Amounts not being recorded into the collateral report for the non-working days. • This currently increases participants collateral requirement by up to the order of 250% compared to a normal Working Day. • This puts a significant financial strain on Market Participants and an unnecessary over collateralisation on the Market. • SEM-O have been looking at a number of options to address this, which are detailed in the next slide.

  3. Progress since last meeting Six ways to realise the proposal have been investigated, with Option 3 the preferred option and Option 6 also feasible

  4. NEXT STEPS • We would ask participants to let us know their views on the suitability of options 3 & 6 • A revised modification will then be brought to Meeting 93 in August We would like to thank Katia and Chris for their help in progressing this

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