Cc g Brochure

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CC&G

Your global partner in post-trade excellence



II

Contents

Overview 1

Continuouslyexpandingclearingoffering 2

ComprehensiveapproachtoRiskManagement 3

CC&G&settlement 8

Realtime,effortlesspost-tradingmanagement 9

«CC&G prides itself in the robustness of its clearing platform,enabling our clients to conduct their business safely, securely and with condence in our full service-offering»

P. Cittadini, CEO of CC&G



11

Overview

CC&G(CassadiCompensazioneeGaranzia)ispartoftheLondon

StockExchangeGroup.CC&GprovidesCentralCounterpartyservices

tomultipletradingvenuesforabroadrangeofassetclassesincluding

equities,ETFs,equityandenergyderivatives,closed-endfunds,

investmentcompanies,government,corporateandconvertible

bonds.Governmentbondsareclearedthroughinteroperabilitybyvirtueofaninnovativedualcounterpartyagreement,therstof

itskind.CC&GalsoprovidesaguaranteeserviceontheNewMic

Interbankcollateralisedmarket.

S e C t i o n S

Clearing system provider, not Legal CCP Compulsory CC&G Membership

Optional CC&G Membership

Markets

Productsguaranteedby CC&G

Settlement

EquitiesEnergy

Derivatives

IDEM Equity

InterbankDeposits

Euro

MTS

EquityDerivatives

Bonds

• Index futures

• Index options

• Single stock futures

• Single stock

options

Energy futures

NewMICinterbank

collateraliseddeposits

• Shares

• Warrants

• Convertiblebonds

• Closed-endfunds

• Investmentcompanies

• REIC

• ETF

• ETC

Governmentand corporate bonds



22

Continuouslyexpandingclearingoffering

Recently, CC&G broadened service range to new products and venues:

In November 2010, CC&G extended the CCP

service on xed income products to include

government, corporate, eurobonds and ABS

listed on MOT market.

CC&G Members trading on Domestic MOT

will benet from risk reduction, anonymity and

lower costs.

In October 2010 CC&G launched a

guarantee service on NewMIC, the Interbank

collateralised deposit market run by e-MID.

Domestic MOTNewMIC

CC&G has strengthened its derivatives

coverage becoming the clearing system

provider of Turquoise Derivatives with a

strong benet for members of both Turquoise

Derivatives and IDEM who can access

post-trading services using the same ITinfrastructure.

Turquoise Derivatives

In June 2011, CC&G began providing CCP

services to bonds traded on EuroTLX

and settled in Monte Titoli. CC&G clients

trading bonds on Domestic MOT, EuroTLX,

MTS, EuroMTS and ICAP benet from

signicant savings due to settlement nettingin addition to margin offsetting across all

trading venues.

EuroTLX



333

ComprehensiveapproachtoRiskManagement

Advantages

1. Trading anonymity

2. CC&G assumes the counterparty risk from tradeexecution

3. Lower tied-up capital required by the regulatory

authority 4. Reduction of systemic risk.

C C & G n o v a t i o n

TradingMember B

TradingMember A

CC&G assumesthe counterparty

risk

Trading Trading

Member A

Trading

Member B

TradingMember B

(ICM)GCM of A

TradingMember A

(NCM)

In order to effectively manage counterparty and

market risks, CC&G adopts an optimal nancial

safeguarding system based on multiple levels of

protection:1. Clearing Membership screening

2. Margin system

3. Additional resources.

1. Clearing Membership screening

CC&G carries out the central counterparty

function by taking on the counterparty risk from

the execution of the contracts, acting as buyer

towards each seller and as seller towards each

buyer, and becoming the guarantor of the nal

settlement of the contracts, ensuring delivery/

receipt of securities versus cash, also in case

of default of the trading counterparty.

s y s t e

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S c r e e n i n g

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e n t

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s y s t e m M a r g i n g

T r a d e



4

M e M b e r

Membership requirements

CC&G Members meet supervisory capital, organisational and technical requirements.

Who can become a Member • Banks and Investment Firms authorized to provide Investment Services in Italy;

• Those authorized to provide such Services subject to mutual recognition;• Other Members of the markets guaranteed by CC&G who have signed the agreement with

a GCM to become an NCM.

How to become a MemberThe entire membership process to CC&G, Borsa Italiana and Monte Titoliis managed on line via the BIt Club website, a simple, fast and efcientcommunication tool.

Supervisory

Capital

R e q u i r e m e n t s

Technical

& Organisational

Requirements

SupervisoryCapital (€)

N. of Non ClearingMembers

25 m Up to 1

30 m From 2 to 5

35 m From 6 to 10

40 m Above 10

If the Supervisory Capital is lower, but at leastequals 15 m€, CC&G accepts a guaranteeissued by a bank for the difference betweenthe Supervisory Capital requirement and theSupervisory Capital held.

SupervisoryCapital (€)

Market

3 m Equities

10 m Derivates

10 m Bonds

10 m More than 1 market

If the Supervisory Capital is lower, but at leastequals 3 m€, CC&G accepts a guaranteeissued by a bank for the difference betweenthe Supervisory Capital requirement and theSupervisory Capital held.

Organisational structure, technological and information technology systems

Two referents for each section

Hold a central cash account in Target 2

Join the central depository service (CSD)

Join the Settlement Services

Directly or througha Settlement Agent

General Clearing Individual Clearing Non Clearing

Clients may subscribe to CC&G as

• General Clearing Member: GCMs become counterparties to CC&G for proprietary and clienttransactions; they can also clear contracts on behalf of their Non-Clearing Members.

• Individual Clearing Member: ICMs become counterparties of CC&G for proprietary and client

transactions.• Non-Clearing Member: NCMs are not counterparties to CC&G. They must be market members

and must sign an agreement with a General Clearing Member for the provision of GCM services.



Rome

5

1. Full exibility in the choice of membership type per market cleared

2. CC&G has an international client base of more than 170 clearing members3. Over 70 direct members, including major international players as GCMs

Advantages

Membersofboththecashequityandequityderivativessections

ofCC&Gbenetfromasignicantdecreaseininitialmargin

requirementsthankstoCC&G’suniquecross-marginingfunction.



6

2. Margin system

The margining system is CC&G’s fundamental

risk management tool. CC&G’s risk management

approach is fully compliant with international

recommendations (CPSS-IOSCO) and ESCB-

CESR and is in line with the current draft of the

new EU Regulation on CCPs with reference to

risk management. Margins are calculated using

sophisticated, proven systems: a methodology based on TIMS (Theoretical Intermarket Margins

System) for equity derivatives products, the ERM

methodology (Equity Risk Management) for cash

equity products, the MMeL methodology (Margins

for Electric Market) for energy derivatives and the

MVP methodology (Method for Portfolio Valuation)

for Italian government bonds.

Equity Derivatives and Cash Equity

Margin Calculation

The metodologies used for equities and equity derivatives are integrated and correlated,

therefore capable of recognising the overall risk

in a portfolio. This allows for the offsetting of risk

between closely correlated products, as well as

cross-margining between derivatives and equity

cash products in the portfolio.

The overall risk exposure for integrated portfolios

with signicant price correlation is determined by:

• Product Group: integrated portfolio

of underlying assets with statistically

signicant price trend correlation;

• Class Group: integrated portfolio of cash and

derivatives instruments related to the same

underlying stock.

Energy Derivatives Margin Calculation

Derivatives contracts traded on IDEX form an

integrated portfolio considered as a whole for

the purpose of Initial Margins calculation.

The MMeL margining methodology has a structure

of classes which recognises contracts tradable on

the market. Each class includes all the contracts of

the same type (futures or options),

Advantages

1. Cross margining between cash equity and equity derivatives signicantly reduces margins, withoptional separate calculation reporting to satisfy customers’ cost allocation needs

2. One collateral pool: guarantees in place cover the cash call on all asset classes

3. Members trading the same asset classes on

multiple trading venues cleared by CC&G takeadvantage of full netting for settlement andmargining purposes

4. Customer choice over number of accounts/sub-accounts on Derivatives and net/grossmargining between main and sub-accounts.

with the same underlying security (PUN) and the

same characteristics (Delivery Period and type of

supply: Baseload, Peakload or Off Peak).

Bonds Margin Calculation

MVP determines the overall risk exposure for

integrated portfolios by grouping classes of bonds

with statistically signicant correlation in their

sensitivity to interest rates variations, measured

by the duration. A single net position is calculated

independently from the market origin of the

contracts - MTS, EuroMTS, BrokerTec, MOT and

EuroTLX - and risk management is accordingly

performed on the net positions.

Initial marginInitial margin is called on a daily basis to cover the

theoretical costs of liquidation, which CC&G would

incur in the event of a member’s default, in order

to close the open positions in the worst possible

market scenario, within a maximum price variation

range called “Margin Interval”.

The “Margin Interval”, specic for each nancial

instrument, is periodically reviewed as a result

of statistical analysis.



77

Intraday margin

Intraday margins are called by CC&G in case

of sudden sharp price variations or an increase of

a member’s excessive overall risk exposure.

Intraday margin is calculated with the same

methodologies as the initial margin.

Collateral

Initial margin can be placed in cash (Euro) or in Euro denominated securities: Italian, French

and German Government Bonds traded on MTS

and EuroMTS.

Government bonds are marked to market daily

at the weighted average price recorded on the

MTS market. The Bonds deposited as collateral

are grouped in classes of haircut based on their

duration, for Italian Government bonds, and

on their time to maturity, for French and German

Government Bonds. Intraday Margins must be

deposited in cash (Euro).

3. Lines of Defence

CC&G manages three separate default funds: one

for equity and equity derivatives, one for energy

derivatives and one for xed income. These default

funds are essential as additional protections to

cover any risks associated with sharp price/

interest rate movements. Initial default fund

contributions are calculated based on the results

of periodic stress tests. Default fund contributions

are re-calculated on a monthly basis based onprevious month’s activity.

Multilevel Financial Safeguarding System

CC&G protects market integrity in case of default

by a clearing member by using a set of nancial

resources which are allocated by using the

following set of nancial resources:

• initial margin of the defaulting member

• contribution to the relevant default fund

of the defaulting member

• CC&G shareholders’ equity of up to € 5 million • remaining default fund, on the basis

of a “loss sharing” principle

• remaining CC&G shareholders’ equity.

Advantages

1. Optimal protection for members in times of stressed markets

2. In case of default by a clearing member, the maximum exposure of each clearing member is limited to his

contribution to the relevant default fund

O u t s t a n

d i n g CC&G’s o w n a s s e t s

O u t s t

a n d ing def a u l t f u n d

C C

& G ’ s o w n a ssets u p t o 5 m

i l l i o n

D e f a u l t i n

g m ember ’ s d e f a u

l t f u n d

Defaulting

member’s

initial margin

In case of default of a participant, market integrity is preserved

by a multi tiered nancial safeguard system.



8

CC&G&settlement

CC&G has a direct account in the Express II

settlement system, managed by Monte Titoli.

All trades cleared by CC&G settle on a net

basis. Net balances against CC&G can be split

into partials in the net settlement cycles and are

subject to being shaped into smaller lots prior

to being submitted to the gross settlement cycle.

CC&G automatically manages buy-ins and sell-outs

according to published rules.

CC&G has introduced additional reporting to

highlight the separate margining of fails and partials

and to report the buy-in and sell-out process.

Advantages

1. Settlement of net balances against CC&G is prioritised over non-CCP guaranteed and

‘off-exchange trades’

2. For settlement purposes, one single balance per security and account is created for Italian

Government Bonds independently from the trading venue: MTS, EuroMTS, BrokerTec,

MOT and EuroTLX.



3

Realtime,effortlesspost-tradingmanagement

1. Derivatives Clearing

BCS, the user interface, integrates all derivatives

clearing functionalities such as early exercise,

international give-up combined with the splitting

facility, position transfer and related enquires into

a single technical infrastructure. BCS also allows

for the download of clearing reports and data les

used to support clearing on the derivatives market.

BCS, fully integrated with the IDEM market

infrastructure, is available in the following versions:

• BCS-WS: stand-alone windows workstation;

• BCS-API: Application Program Interface

to automate the end-to-end processing

of transactions;

• BCS PLUS, both WS and API, allows the

automation of the International give-up.

International give-up business model

Contracts executed on the IDEM market can be

transferred on trade date at the execution price.

This functionality, combined with the trade splitting

facility, fully complies with the international uniform

give-up agreement and allows STP into the middle

and back ofce systems.

1. General Clearing Members benet from

a complete Non-Clearing Member post

trading report for reconciliation purposes

2. BCS PLUS automates international

give-up management

3. General Clearing Members can monitor

the trading activity of their NCMs

throughout the business day.

Advantages

2. Reporting

A wide range of reports and data les is available

to allow for quick reconciliation of transactions,

positions and margins.

ICWS allows for the download of clearing reports,

fails reporting and data les to support clearing on

all markets.

FTP, FTPS and SFTP are available for all markets

to download batch les, with different levels of

security.

Give-upfunctionalitycombinedwithtradesplittingavailable

asacompleteSTPmodel.

CC&G offers a range of exible connectivity solutions for accessing the clearing system to suit the needs

of all clearing members.

9



© September 2011 CC&G - London Stock Exchange Group

All rights reserved.

The publication of this document does not represent solicitation, by Borsa Italiana S.p.A., of public saving and is not to

be considered as a recommendation by Borsa Italiana as to the suitability of the investment, if any, herein described. This

document has not to be considered complete and it is meant for information and discussion purposes only. Borsa Italiana

accepts no liability, arising, without limitation to the generality of the foregoing, from inaccuracies and/or mistakes, for

decisions and/or actions taken by any party based on this documents. Trademarks Monte Titoli, X-TRM and MT-X areowned by Monte Titoli S.p.A. London Stock Exchange, the coat of arms device and AIM are a registered trade mark of

London Stock Exchange plc. The above trademarks and any other trademark owned by the London Stock Exchange Group

cannot be used without express written consent by the Company having the ownership of the same. Borsa Italiana S.p.A.

and its subsidiaries are subject to direction and coordination of London Stock Exchange Group Holdings (Italy) Ltd – Italian

branch. The Group promotes and offers the post-trading services of Cassa di Compensazione e Garanzia S.p.A. and Monte

Titoli S.p.A. in an equitable, transparent and non-discriminatory manner and on the basis of criteria and procedure aimed at

assuring interoperability, security and equal treatment among market infrastructures, to all subjects who so request and are

qualied in accordance with national and community legislation applicable rules and decisions of the competent Authorities

Piazza degli Affari, 620123 Milano - Italy Tel +39 02 336351

Contacts

[email protected] - Tel. +39 02 72426 [email protected] - Tel. +39 02 33635 283

[email protected] - Tel. +44 0207 797 3052

CC&G - Cassa di Compensazione e Garanzia

Via Tomacelli, 14600186 Roma - Italy Tel +39 06 32395202

www.ccg.itwww.londonstockexchangegroup.com

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