Order ECC/2405/2012 authorizing MEFF to act as a Central Counterparty for fixed-income securities and amending its regulations

OFFICIAL STATE GAZETTE
No. 270 Friday, November 9, 2012 Sec. III. Page 78444
III. OTHER REGULATIONS
MINISTRY OF ECONOMY AND COMPETITIVENESS
13875 Order ECC/2405/2012, of October 22, authorizing MEFF Sociedad Rectora de Productos Derivados, S.A.U. to perform the activity of a central counterparty in relation to operations on fixed-income securities and modifying its regulations.

Having reviewed the documentation submitted by MEFF Sociedad Rectora de Productos Derivados, S.A.U. (hereinafter, MEFF), requesting, under the auspices of Article 44 ter of Law 24/1988, of July 28, on the Securities Market (LMV), as amended by Law 32/2011, of October 4, authorization to perform the activity of a Central Counterparty (CCP) in relation to operations on negotiable fixed-income securities.

Finding that the application also extends to the approval of the General Conditions of the contracts for operations on Spanish public debt and contracts for operations on guaranteed debt, on which the CCP activity will be carried out; the verification that MEFF's corporate bylaws allow its action as a CCP for fixed-income securities operations; and that the current Regulations of MEFF support and are applicable to this same action.

Finding that both the National Securities Market Commission (CNMV) and the Bank of Spain have issued favorable reports on the authorization request submitted by MEFF to expand its activity as a central counterparty service provider to contracts deriving from operations on negotiable fixed-income securities and, specifically, on operations with Spanish public debt and guaranteed debt.

Finding that MEFF, after receiving observations from the National Securities Market Commission and the Bank of Spain, has submitted an addendum to its Regulations in order to remedy the deficiencies pointed out regarding its new activities as a CCP for fixed-income securities operations; an addendum that has received the conformity of the supervisory bodies.

Finding that the National Securities Market Commission and the Bank of Spain also pronounce favorably that the Minister of Economy and Competitiveness approves, as development norms of MEFF's Regulations, the General Conditions of the contracts for operations on Spanish public debt and the contracts for operations on guaranteed debt, once they have been reviewed and updated to the new wording of MEFF's Regulations.

Finding that the National Securities Market Commission considers that in the current organizational and functional-corporate configuration of MEFF, its corporate bylaws are sufficient to provide services as a CCP on operations with negotiable fixed-income securities.

Considering that Article 44 ter of Law 24/1988, of July 28, on the Securities Market (LMV), as amended by Law 32/2011, of October 4, states that it corresponds to the Minister of Economy and Competitiveness, prior to the report of the National Securities Market Commission and the Bank of Spain, to authorize central counterparties to perform functions of intermediation on their own account, regarding the clearing and settlement processes of obligations derived from the participation of member entities in the clearing and settlement systems of securities or financial instruments recognized in accordance with Law 41/1999, of November 12, on payment systems and securities settlement, as well as regarding operations not carried out in official markets. The entity or entities thus authorized will develop their activities subject to what is established regarding this matter in the corresponding internal Regulations, which must be approved by the Minister of Economy and Competitiveness, prior to the report of the National Securities Market Commission, the Bank of Spain, and the Autonomous Communities whose Statutes of Autonomy recognize them with competencies in the matter of regulation of securities trading centers.

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Finding that the Autonomous Communities of Catalonia, the Basque Country, and the Valencian Community have pronounced favorably regarding the authorization requested by MEFF, which includes the modification of its Regulations.

Considering that the application and documentation presented, as well as the requirements demanded, are adequate to what is required in Article 44 ter of Law 24/1988, of July 28, on the Securities Market (LMV), as amended by Law 32/2011, of October 4.

This Minister, prior to the favorable report of the National Securities Market Commission, the Bank of Spain, and the Autonomous Communities of Catalonia, the Basque Country, and the Valencian Community, has resolved to authorize MEFF Sociedad Rectora de Productos Derivados, S.A.U.:

1. To perform the activity of Central Counterparty in relation to operations on negotiable fixed-income securities.
2. To the modification of its Regulations, approved by Agreement of the Council of the National Securities Market Commission of December 21, 2010 (BOE of January 5, 2011), in the terms derived from the Addendum presented by MEFF, a copy of which is attached sealed.
3. As annexes to MEFF's Regulations, the General Conditions of the contracts for operations on Spanish public debt and the General Conditions of the contracts for operations on guaranteed debt are approved, copies of which are also attached sealed.

This Order and its annexes shall be published in the "Official State Gazette."
Madrid, October 22, 2012.–The Minister of Economy and Competitiveness, P.D. (Order ECC/1695/2012, of July 27), the Secretary of State for Economy and Support for the Enterprise, Fernando Jiménez Latorre.

ADDENDUM
Regulation applicable to MEFF in its central counterparty activity in relation to fixed-income securities operations

This Addendum collects the norms that will be applicable to the Management Society of the Official Secondary Market for Futures and Options MEFF (hereinafter MEFF) in the performance of the central counterparty activity that MEFF may carry out under the auspices of Article 44 ter of Law 24/1988, of July 28, on the Securities Market (hereinafter, Securities Market Law).

This Addendum refers to the authorization provided for in Article 44 ter of the Securities Market Law that MEFF has requested from the Ministry of Economy and Competitiveness to be able to perform the central counterparty activity in relation to operations on fixed-income securities.

1st Rule.–Scope of MEFF's action as a central counterparty. The activity that MEFF can develop as a central counterparty under the auspices of Article 44 ter of the Securities Market Law refers to spot operations on fixed-income securities.

MEFF will develop the central counterparty activity for fixed-income operations within the regulatory framework of MEFF's Regulations, which entered into force on January 24, 2011, through Resolution of the National Securities Market Commission of December 21, 2010, BOE of January 5, 2011, by which the Regulations of the Official Secondary Market for Futures and Options (MEFF) (hereinafter MEFF Regulations) are published.

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2nd Rule.–Contracts. For the purposes of exercising the aforementioned central counterparty activity of MEFF, the concept of "Contract" provided for in Article 1.5 of MEFF's Regulations will include operations on fixed-income securities.

3rd Rule.–Class of Contracts. The definition of "Class of Contract" provided for in Article 1.5 of MEFF's Regulations will include Contracts on fixed-income securities referred to the same Underlying Asset.

4th Rule.–Regulation. In accordance with Article 1.3 of MEFF's Regulations, the regulation applicable to the central counterparty activity that MEFF performs for fixed-income securities will be that contained in MEFF's Regulations and its development norms.

The provisions contained in the following chapters of MEFF's Regulations will be especially applicable to MEFF in the exercise of the aforementioned activity:

Participants.–The regime of Members and Clients contained in Chapters II and III of MEFF's Regulations, which comprises from Article 3 to Article 9, both inclusive.

The General Conditions of the contracts on fixed-income securities will establish, in accordance with Article 3.2 of MEFF's Regulations, the specific conditions regarding the activity of Members concerning Contracts on fixed-income securities.

Register.–The regime provided for the Accounting Register in Chapter VI of MEFF's Regulations will also be applicable to the aforementioned central counterparty activity, comprising the regulation provided from Article 16 to Article 19 of MEFF's Regulations, both inclusive.

Settlement and Guarantees.–The regulation of the central counterparty function in relation to settlement and the provision of guarantees by participants will be that contained in Chapter VII of the aforementioned Regulations, comprising Articles 20 to 26 of MEFF's Regulations, both inclusive.

Default.–The default regime of MEFF as a central counterparty will be that provided for in Articles 27 to 35, both inclusive, Chapter VIII, of MEFF's Regulations.

As development norms of MEFF's Regulations, the General Conditions that collect the characteristics of contracts on fixed-income securities will have special relevance for the central counterparty activity that MEFF develops under the auspices of Article 44 ter of the Securities Market Law and the authorization granted by the Ministry of Economy and Competitiveness.

The General Conditions constitute, in accordance with Article 2.8 of MEFF's Regulations, annexes to it and collect the particularities and terms by which MEFF's activity as a central counterparty for fixed-income securities will be governed.

These general conditions will establish the terms under which MEFF will act as a central counterparty, in accordance with Article 11.2 of Royal Decree 1282/2010, of October 15, which regulates the official secondary markets for futures, options, and other financial derivative instruments, describing, among other matters, the type of contract underlying, the group of contracts to which it belongs, the functions that the management society will carry out in relation to the contracts, the members who will have access to the register for the purposes of counterparty of that contract, the settlement rules at maturity, and remaining matters provided for in the aforementioned article.

July 27, 2012.

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ANNEX I
CLEARING HOUSE FOR OPERATIONS WITH FIXED-INCOME SECURITIES General Conditions Contracts for operations on Spanish public debt Fixed-Income Securities Contract Group (admitted only to Register for counterparty purposes)

INDEX
1. Introduction.
2. Additional conditions applicable to members and clients with access to the Register.
3. Underlying asset. Types of operation and contracts.
4. Technical specifications.
5. Registration of contracts.
6. Novation of operations and settlement in IBERCLEAR.
7. MEFF's action in case of default by a participant (member or client) of MEFF.
8. Calculation of guarantees and method of constitution.
9. Limits to positions.
10. Dissemination of information.

1. Introduction
These General Conditions collect the characteristics of the Contracts for Operations on Spanish Sovereign Public Debt to be settled on the Fixed Income platform (CADE) of the Management Society of the Securities Registration, Clearing and Settlement Systems, S.A. Unipersonal (hereinafter, IBERCLEAR).

The Contracts described in these General Conditions form part of the Fixed-Income Securities Contract Group, regarding which MEFF carries out the central counterparty activity, under the auspices of Article 44 ter of Law 24/1988, of July 28, on the Securities Market, with the particularities and in the terms established in these General Conditions, in accordance with Articles 1.3 and 2.8 of the Regulations.

Such Contracts are admitted exclusively to Register for counterparty purposes, in the terms of the Regulations.

These General Conditions form part of the Market regulations, developing those provisions in which the Regulations refer to the General Conditions of each Contract and establishing the necessary particularities by reason of the Contracts and the activity developed by MEFF regarding them.

2. Additional conditions applicable to members and clients with access to the Register
Members with access to the Register and settlement will be all those who are members of MEFF, with the scope determined by the class of Member to which they belong, with the following additional requirements, established under the auspices of Article 3.2 of the Regulations:

1. They must be Participating Entities in IBERCLEAR, the entity responsible for the settlement of securities.
2. They must have a cash account in the entity or organism where the settlement of cash associated with the securities takes place, specifically in the TARGET2 system, or have signed a contract with a Payment Agent, which does have an account in said entity.

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3. Liqudation Members must make a contribution to the Collective Guarantee of the Fixed-Income Securities Contract Group, in addition to meeting the specific requirements on minimum own resources and minimum guarantee established in MEFF's regulation regarding the activity of Liqudation Members in said Contract Group.

4. The Member must have minimum own resources of 100 million euros, whether it is a Trading Member or an Individual Liqudation Member. If it is a General Liqudation Member, it must have minimum own resources of 125 million euros.

5. Every Liqudation Member must have constituted a minimum Individual Guarantee, which will be established by Circular, in accordance with Article 22.3.b of the Regulations.

Members may also be, under special conditions, the Bank of Spain, the Official Credit Institute, and other resident or non-resident entities that carry out analogous activities.

3. Underlying asset. Types of operation and contracts
   The following are admitted to register:

Double or simultaneous operations (repo) on each of the references of Spanish Public Debt admitted to trading on the Public Debt Market of Annotations and that are included in the Circular that establishes the references of Eligible Public Debt.

Simple spot and forward purchase and sale operations on the same references.

Operations are registered in Contracts, which are defined by a reference object of registration and a settlement or maturity date. Double or simultaneous operations will be split into separate Contracts, with different settlement dates, one for each purchase and sale included in the operation.

The operations and the references object of registration and the deadlines will be established by Circular.

4. Technical specifications
   Specifications of the Contracts admitted to register:

Underlying Asset: Each of the references of Spanish Public Debt admitted to register by Circular.

Contract Nominal: The nominal of the Public Debt, in multiples of 1,000 euros.

Contract Cash: Cash from the purchase and sale of securities, in euros, with at least two decimal places.

Contract Price: Ratio between the cash value and the nominal value of the purchase and sale of securities. It is expressed as a percentage of the nominal, with at least two decimal places.

Daily Settlement Price. It is an approximation to the "market price". It is expressed as a percentage of the nominal, with at least two decimal places. The criteria will be determined by Circular.

Maturity Date: Date on which the purchase and sale of securities must be settled. Any business day in IBERCLEAR and in the TARGET2 platform.

Last day of registration: The same day as the Maturity Date.

Settlement of commissions: First Business Day following the registration of the Operation.

Guarantees: Variable depending on the portfolio (see section Calculation of Guarantees). They will be supplied on the Business Day following the calculation date as determined by Circular.

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Mark-to-market adjustment: Added to the Position Guarantee, as determined in the corresponding Circular. It is a function of the difference between the Daily Settlement Price of the Session and the contract price.

Introduction of References admitted to register: MEFF may introduce new references, in accordance with what is established in the corresponding Circular.

Form of settlement at maturity: By delivery of the underlying asset in the purchase and sale of securities.

5. Registration of contracts
   The trading of the Operations to be registered may be agreed directly between participants or through platforms with which MEFF makes the appropriate agreements.

The forms of communication of the Operations to MEFF will be:

1. Communication of Operations contracted through electronic trading platforms. The electronic trading platform with which MEFF has an agreement will send the operations directly to MEFF.

2. Communication of operations agreed between two participants, matched through the IBERCLEAR SUC mechanism. IBERCLEAR registers the Operation as "pending acceptance", until MEFF manifests its conformity or rejection to register the operation.

The procedure to be followed for the Registration of the Operations, the prior checks that MEFF will carry out to accept the same, and the cases in which MEFF might not accept a registration will be determined by Circular.

The registration schedule will be determined by MEFF through the corresponding Circular.

6. Novation of operations and settlement in IBERCLEAR
   MEFF will act as counterparty to the Contracts from the moment they are noted in the Central Register. As a consequence of its action as counterparty, MEFF becomes the Buyer vis-à-vis the Seller and the Seller vis-à-vis the Buyer, such that the original Buyer and Seller cease to have reciprocal rights and obligations, coming to have them exclusively vis-à-vis MEFF.

Operations registered in MEFF will be settled in IBERCLEAR in accordance with its rules. Without prejudice to the aforementioned counterparty function, the settlement of operations in IBERCLEAR can be carried out between the original parties of the Contract. Only if there is incapacity by one of the parties to settle, MEFF will substitute them for settlement purposes vis-à-vis the other party.

7. MEFF's action in case of default by a participant (member or client) of MEFF
   Default, its causes, and MEFF's action regarding it are regulated in Chapter VI of RD 1282/2010 and in more detail in Chapter 8 of MEFF's Regulations.

Additionally, the following particular rules will apply:

1. Regarding other compliant Members and Clients, the default of any Member or Client will not exonerate MEFF from compliance with its obligations towards other Members and Clients regarding Operations pending settlement. Therefore, MEFF will proceed to provide IBERCLEAR with the securities or cash required for the fulfillment of Operations pending settlement.

2. Regarding the defaulting Member or Client: If the cause of default is due to an incident in settlement in the Closing phase of the CADE settlement session, IBERCLEAR will communicate to MEFF the lack of securities or cash that make the settlement of the Operation impossible.

All Operations pending settlement in which the defaulting Member or Client intervenes will be cancelled.

In case of failure to deliver securities, MEFF will buy in the market the necessary securities. In exceptional situations of impossibility of obtaining in the market the securities to be delivered, it may deliver equivalent securities to those originally registered, adequately compensating the affected Members or Clients, to the extent permitted by IBERCLEAR's rules, all of this in accordance with what is established in the corresponding Circular. In case of non-payment, MEFF will sell in the market the securities that have been delivered to it.

MEFF will charge the defaulting Member or Client all costs incurred by MEFF, including costs incurred to obtain the securities or make them available for the fulfillment of Operations pending settlement with Members and Clients who are complying with their obligations, as well as the pertinent penalties.

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8. Calculation of guarantees and method of constitution
   It will be carried out by the portfolio analysis procedure, taking into account all Contracts of the same portfolio to find the positive or negative value of the portfolio in the worst-case scenario simulated. The calculation will take into account the particularities of the clearing and settlement system of Debt in IBERCLEAR.

By Circular, the model to be used and the necessary parameters for the calculation will be specified.

Those securities and assets that MEFF determines by Circular may be provided as Guarantee.

9. Limits to positions
   MEFF may limit by Circular the open position volume of a Member or a Client in a specific Contract, in order to avoid excessive concentration of risks or possible market dominance position, in accordance with what is established in the Regulations.

The aforementioned Circular, if applicable, will also develop the procedure for a Member or Client to return within the established limits in case they temporarily exceed them.

10. Dissemination of information
    MEFF will disseminate daily and historical information on the registered volume, Open Position, and Daily Settlement Prices.

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ANNEX II
CLEARING HOUSE FOR OPERATIONS WITH FIXED-INCOME SECURITIES General Conditions Contracts for operations On guaranteed debt Fixed-Income Securities Contract Group (Admitted only to Register for counterparty purposes)

INDEX

1. Introduction.
2. Members and clients with access to the Register.
3. Underlying asset. Types of operation and contracts.
4. Te