The DCE's Clearing Department and Clearing System
The Clearing Department at the DCE is responsible for exchange and OTC clearing, settlement and accounting; margin management; warehouse receipt and collateral management; settlement risk management; depository bank management; making and implementing commission policies, etc.
The DCE's Clearing System is one subsystem of the overall DCE Business System. The system design is the result of the DCE's own independent research & development with full intellectual property rights. The DCE's Clearing System has powerful functionality and is capable of both clearing trades and delivery for a wide range of commodity futures and options. The DCE has put into place a two-tiered clearing system, with the exchange clearing its own members and the members clearing their respective clients. The exchange does not directly carry out clearing activities on individual clients.
Mark-to-Market at the DCE
The DCE has put into practice a same-day debt-free clearing system, namely a daily mark-to-market system. Upon the completion of the day's trading, the exchange will, according to the day's settlement price, settle the profits and losses, trading margins and other fees for all contracts. The amounts payable and receivable will then be transferred to and from the corresponding member settlement reserves.
If the day's trading margin at time of settlement exceeds the prior day's trading margin at time of settlement, the difference will be deducted from the member's clearing deposit.
If the day's trading margin at time of settlement is less than the prior day's trading margin at time of settlement, the difference will be added to the member's clearing deposit.
The day's profits will be placed into the member's clearing deposit, while the day's losses will be removed the member's clearing deposit. All fees and general expenses will be deducted from the member's clearing deposit.
After settlement, if a member's clearing deposit falls below the minimum balance, the exchange will immediately issue an additional margin call to the member.
Operation Principles of the DCE's Trading Margins and Clearing deposits
Margin refers to the funds paid by members in accordance with the required standards, to be used for settlement and ensuring compliance. Margins are divided into two parts: clearing deposits and trading margins.
Clearing deposit refers to the settlement account funds prepared in advance by the member for trading settlements to be used at the exchange. These funds are not occupied by the contract margins.
Trading margin refers to the settlement account funds prepared by the member for ensuring that all contracts are fulfilled. These funds are occupied by the contract margins. After a transaction has been carried out, the exchange will deduct a certain percentage of the contract value from both parties' trading margins.
Currently, there is only one type of delivery method at the DCE: physical delivery. Physical delivery is a method in which both parties to a contract must exchange ownership rights to the commodities listed in all contracts that have not been offset. Individual customers are not permitted to give or receive delivery.
The futures Physical Delivery may take the form of the Exchange of Futures for Physicals (the "EFP"), the Bill of Lading Delivery, the Rolling Delivery, the Daily Selective Delivery, the One-off Delivery and other processes prescribed by the Exchange.
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