What is the MEFF Exchange and what is it for

The MEFF Exchange it is the operation that influences the futuristic official market that allows various financial options in Spain. For being a official market, is highly supervised, controlled and regulated by the economic authorities of that country, such as the The Ministry of Economy and the CNMV is also involved in the BME group (Bolsas y Mercados Españoles).

MEFF Governing Society of the Derivative Products Market, this company was born through the regulations of the Eropean Merket Infrastructure Regulation, which specified the counterparty function so that it was separated from the function of the market.

Due to this, the BME was also divided from this company, making the operation of the Clearing House and It is in charge of the settlement and clearing of futures and options regulated by the company MEFF Exchange.

Entities that make up the MEFF Exchange

With the update of the MEFF reform, the market only exists as one type of main member, despite This, most of the agents that previously acted in the MEFF, now also do so with the BME Clearing. Among its entities are:

Trading Members for Own Account

These members are all industrial business, who can access the market for the inferior product, instead of being producers, distributors, marketers or being an energy reserve. They can make contracts for their own account or for some entities that belong to their group. The contracts must be carried out with the participation of a general clearing member, together with those responsible who will fulfill said contract.

Trading Member

It is about any investment company that wants to make a contract, which, like the previous one must do so in front of a general clearing member, together with whom he will be responsible for the contract.

Individual Clearing Member

It can be any investment company, which carries out the contracts on its behalf or also on behalf of its clients, responding directly to their commitment with BME Clearing.

General Clearing Member

Like the previous one, it can be an investment company and even the same functions, respond to BME Clearing about the accounts of the trading members who have signed the contracts.

The client

It is the figure that the contract must carry out, together with a negotiating member or together with an individual or general compensator, against whom it will be responsible for the obligations of the contract. The client will not be able to directly confirm the operations, nor will they have access to the back office information.

What is the MEFF connection

This system has a central annotation technique and the ways to connect its instruments are as follows:

VPN connection

The system MEFF It offers the possibility of having access through the Internet via VPN in some entities where there is no negotiation, but rather the registry of operations or applications. To understand what the trade log is about, the following should be taken into account:

• Through it you can consult the data of a session, the open positions and the registered operations of an account.

• The entry of an application that is given between two members to make a private purchase - sale contract.
• The request for a give-up is extremely necessary to manage the operations derived from a treasury desk of a certain bank.

Proximity

This installation can be obtained by the member who wishes on their hardware, it is a room that is located a short distance from the MEFF central system. It is managed by Visual Trader and through it you can have access to the cash market.

The indirect connection

It is obtained through the clearing member, which generates a reduction in the costs of this system.

Through direct connection

This connection is achieved through its lines and efficient equipment maintained by MEFF.

The MEFF after the stock market reform

After this reform and in order to adapt to the standards of the European Market Infrastructure Regulation, the MEFF had to be shared in two companies. There is, on the one hand, the MEFF Exchange, which is responsible for managing only market activities and for the other is BME Clearing, which works as a clearing house to avoid the risk of counterpart.

The MEFF Exchange company currently fulfills the following functions:

• It defines the characteristics in a concrete way in all the contracts that are supported for a negotiation.
• It organizes, directs, manages, orders and supervises all negotiations, trying to make it work best.
• It transmits the necessary information to the contracts that are negotiated.
• It allows having agreements with the different central counterparty entities, so that they are later approved by the National Securities Market Commission.

What are the derivative products found in the MEFF

One of the firsts is to obtain the negotiation of regulated products, among those derivative products are:

• Futures on the 10-year national bond.
• Futures on the dividend index.
• Futures and options on stocks.
• Stock dividend futures.
• Instruments derived from electricity.
• Futures and options of the Ibex 35.

Operation and functions of the MEFF clearinghouse

MEFF provides as a Clearing House, the guarantee to cover both the clearing members and the members' clients, acting as a counterpart for each of them and the segregation of the open positions in the market of the funds of the customers.

This advantage facilitates the administrative processing of the members and also avoids the risk of the camera, this means that the responsibility for client positions is shared between the clearing members and the customers.

Regarding the characteristics of the operation and functions of the clearing house in MEFF, the following should be noted:

• It has a counterpart action on the part of the contracting parties.
• Negotiates the risk of the positions of each of the investors.
• Determines the margins of the guarantee deposits required by MEFF operations.
• The gains and losses generated in a session are settled daily.
• Settlements are made when contacts expire.
• It performs functions from the global account, for clients who do operations with more than one member.

Types of collateral used in the MEFF

This system uses three types of guarantees which are:

Initial warranty

At the time of becoming a clearing member, an initial guarantee must be established that is in the name of MEFF, this guarantee consists of a deposit that can be blocked in favor of the same in order to cover the risk produced by the clearing member and their respective clients at the time a position is opened, which will then be covered by the deposit daily.

Down Payment

It is the guarantee of the daily deposits that are requested from all members and clients, so that they can pay off the possible risks that may arise from open positions. It is a deposit capable of covering all costs, taking into account the open positions of a holder.

Extraordinary guarantee

These occur under exceptional circumstances or in the event that MEFF considers that the results are high risk, which are detected in real time in each of the operations. The clearinghouse recognizes any trading session, guarantees deposits, as well as profits and losses where the holder is involved.