Clearing Firm OTC Confirmation and Claim API - Conceptual Flows

Trade Clearing Flows - Successfully Cleared

CME Hosted Credit Check Model / SEF Pre-approved (Both Sides) - Trade Cleared 

This scenario illustrates the workflow where a dual-sided trade is sent to CME Clearing using the CME ClearPort API. The trades have been executed on a SEF or has been affirmed by an external platform. Both the clearing firms have setup risk limits in CME. CME ClearPort does the credit check and the trade passes credit.The steps are:

• CME ClearPort validates the trade for product, account, credit, and other trade information.

• The trade will be sent to Clearing If the trade passes all the validations including credit.

• CME ClearPort validates product, account and applying credit limits set by clearing firm(s). Both sides passes credit check. The credit limit is utilized for the side.  

• CME Clearing sends alleged trades to both Clearing Firms.

• Clear Trade Confirms are sent to both the Clearing Firms. 

Clearing Firm Explicit Claim Model (Both Sides) - Trade Cleared 

This scenario illustrates the workflow where a dual sided trade is sent to CME Clearing using the CME ClearPort API. The trades have been executed on a SEF or has been affirmed by an external platform. Both the clearing firms have opted to claim the trade. CME ClearPort does not do the credit check and the trade is sent to the clearing firms to be explicitly claimed.The steps are:

• CME ClearPort validates the trade for product, and account information on the trade.

  • The clearing firms have opted to claim the trade.So the trade goes into a claim workflow

• CME send an alleged trade notification requesting to claim the trade to clearing firms of both sides.

• Both the clearing firms explicitly claim the trade.  

• Cleared Trade confirms are sent to both the clearing firms.

CME Hosted Credit Check by One Side and Explicit Claim by the Other Clearing Firm 

This scenario illustrates the workflow where a dual sided trade is sent to CME Clearing using the CME ClearPort API. The trades have been executed on a SEF or has been affirmed by an external platform. One of the clearing firms is setup to have the credit check performed at CME and the other clearing has opted to explicitly claim the trade. The steps are:

• CME ClearPort validates the trade for product, account and applying credit limits set by clearing firm(s).

  • One side passes Credit Check. The credit limit is utilized for the side.

  • The clearing firm of the other side has opted to claim.So the trade goes into a claim workflow.

• CME send an alleged trades to both the clearing firms.

• The clearing firm that uses a CME hosted Credit check and passes the credit check receives an auto-claim notification 

• The other clearing firm explicitly claims the trade.

• Cleared Trade confirms are sent to both of the clearing firms.

CME Hosted Automatic Credit Check Model - Trade Cleared 

This scenario illustrates the workflow where a dual sided trade is sent to CME Clearing using the CME ClearPort API. The trades are automatically credit checked by CME ClearPort. The clearing firms do not have the option available. If the trade passes credit, the trade is considered to be cleared.  The steps are:

• CME ClearPort validates the trade for product, account, credit, and other trade information.

• The trade will be sent to Clearing If the trade passes all the validations including credit.

• CME ClearPort validates product, account and applying credit limits set by clearing firms (s), (Both sides passes credit check. The credit limit is utilized for the side.  

• Cleared Trade Confirms are sent to both the Clearing Firms. 

Trade Clearing Flows - Trade Rejected (Credit Failure) Flows

These use cases depict trade rejected due to credit failure. The trade could fail credit in any of the credit control models.

• CME Hosted Automatic Credit Check model

• Explicit Claim model allows for CME Hosted Credit Check or Explicit claim by firms

CME Hosted Automatic Credit Check Model – One Side Fails Credit

This scenario illustrates the workflow where a dual sided trade is sent to CME Clearing using the CME ClearPort API. The trades are automatically credit checked by CME ClearPort. The clearing firms do not have the option available. CME ClearPort does the credit check and one of the sides fails credit. The steps are:

• CME ClearPort  validates the trade for product, account and applying credit limits set by clearing firm(s).

  • One side fails Credit Check.

• CME ClearPort rejects the trade. The trade is not sent to CME DCO for clearing.

Explicit Claim by Both Sides - One Side Explicitly Rejects 

This scenario illustrates the workflow where a dual sided trade is sent to CME Clearing using the CME ClearPort API. The trades have been executed on a SEF or has been affirmed by an external platform. Both the clearing firms have opted to explicitly claim the trade. The steps are:

• CME Clearing sends an alleged trade notification to clearing firms of both sides of the trade.

• One of the clearing firm explicitly claims the trade.

• The clearing firm is acknowledged and the submitter is notified of the claim.

• Clearing firm of the other side explicitly rejects the trade.

• CME sends a Trade rejected (not cleared) notification to the Clearing firm(s).

Auto Claim by CME Due to CME Hosted Credit Check and Explicit Reject by the Other Clearing Firm

This scenario illustrates the workflow where a dual sided trade is sent to CME Clearing using the CME ClearPort API. The trades have been executed on a SEF or has been affirmed by an external platform. One of the clearing firms is setup to have the credit check performed at CME and the other clearing has opted to explicitly claim the trade. The clearing firm of the other side explicitly rejects the trade.The steps are:

• After validating the product, account and applying credit limits set by clearing firm (s)

  • One side passes Credit Check.The credit limit is utilized for the side.

  •  The clearing firm of the other side has opted to claim. So the trade goes into a claim workflow.

• CME sends an alleged trade notification to clearing firms requiring claim. Optionally the other clearing firm may also receive an alleged trade based on the asset class. 

• CME sends a Claim notification to the clearing firm whose side passes credit

• Clearing firm of the other side explicitly rejects the trade.

• CME clearing may optionally acknowledge the Clearing firm on the reject based on the asset class.

• The Credit limit utilization is backed out for the non-claiming side.

• CME Clearing sends a Trade rejected (not cleared) notification to the Clearing firm(s).

One Side Passes CME Credit Check, Clearing Org Rejects 

This scenario illustrates the workflow where a dual sided trade is sent to CME Clearing using the CME ClearPort API. The trades have been executed on a SEF or has been affirmed by an external platform. One of the clearing firms has set up the credit check at CME and other is set up to explicitly claim the trade.The clearing firm of the other side does not accept the trade on time. The clearing org rejects the trade after a regulatory mandated time limit. The steps are:

• .After validating the product,account and applying credit limits set by Clearing firm(s):

  • One side passes credit check. The credit limit is utilized for the side.

  • The Clearing firm of the other side has opted to claim. So the trade goes into a claim workflow .

• CME sends an alleged trade notification to clearing firms requiring claim. Optionally the other clearing firm may also receive an alleged trade based on the asset class. 

• CME sends a Claim notification to the clearing firm whose side passes credit.

• Clearing firm does not accept the trade within the mandated time limit. Clearing Org does an automated reject of the trade. 

• CME sends an automated Clearing Reject notification to both the Clearing firms. 

• The credit limit utilization is backed out for the non-claiming side.

• CME notifies the submitter of the rejected trade.

• CME sends a Trade rejected (not cleared) notification to the Clearing firm(s).

Trade Rejected Due to Product and Account Validation

This scenario illustrates the workflow where a dual sided trade is sent to CME Clearing using the CME ClearPort API. The trades have been executed on a SEF or has been affirmed by an external platform. The trade fails product or account validations in CME ClearPort. The steps are:

• CME ClearPort validates the trade for product/account and if trade fails any validations,CME sends a negative Ack or a Rejected trade message to the submitter indicating that the product or account is invalid.

• The Clearing firms are not notified in this scenario.

Trade Clearing Flows - Withdraw/Cancel

Trade Pending Clearing Firm Claim – Withdrawal Successful

This scenario illustrates the workflow where a dual-sided trade is sent to CME Clearing using the CME ClearPort API. The trades have been executed on a SEF or has been affirmed by an external platform. The submitter initiates a withdrawal/cancellation of the trade after both the principals agree to the withdrawal. The steps are:

• .CME ClearPort validated product,account and applying credit limits set by Clearing firm(s):

  • One side passes Credit Check. The credit limit is utilized for the side.

  • The Clearing firm of the other side has opted to claim. So the trade goes into a claim workflow.

• CME sends an alleged trade notification to clearing firms requiring claim. Optionally the other clearing firm may also receive an alleged trade based on the asset class. 

• CME sends a Claim notification to the Clearing firm whose side passes credit.

• Both sides agree to withdraw/cancel that trade that is pending approval (not yet cleared).

• Submitter sends a Trade Withdrawal/Cancel message to CME.

• CME sends Trade Cancel notification message to both the Clearing Firms.

• CME sends Trade cancel notification message to the submitter.
  
  
  

Trade Already Cleared – Withdrawal Rejected

This scenario illustrates the workflow where a dual sided trade is sent to CME Clearing using the CME ClearPort API. The trades have been executed on a SEF or has been affirmed by an external platform. Both the clearing firms have setup risk limits in CME. CME ClearPort does the credit check and the trade passes credit.The submitter initiates a withdrawal/cancellation of the trade after both the principals agree to the withdrawal. The steps are:

• Both sides pass Credit Check. The credit limit is utilized for the side.

• CME optionally (certain asset classes like FX, Commodities) sends an alleged trade notification to clearing firms requiring claim.

• CME sends an Auto Claim notification to both the Clearing firms

• Both sides agree to withdraw/cancel that trade that is pending approval (not yet cleared).

• The platform sends a Trade Withdrawal/Cancel message to CME.

• CME ClearPort rejects the withdrawal request because the trade is already cleared. The Clearing firms are not notified of the withdrawal.