NASDAQ OMX - nosclearing.com

1 NOS CLEARING ASA Key changes affecting the NOS Clearing Members following the NASDAQ OMX acquisition - NASDAQ OMX as your counterparty - Clearing model and trade-flow - IT changes - Default Fund - New Collateral and Settlement solution - Change of Rulebook and agreements - Technical interfaces - Migration timeline 12th February 2013 NOS Clearing ASA Information on upcoming changes 2 Contents Introduction .. 3 NASDAQ OMX as your counterparty .. 5 The clearing house .. 5 Clearing Membership .. 5 Account structure .. 5 Products cleared by NASDAQ OMX Stockholm AB .. 6 EMIR and upcoming regulatory changes .. 6 IT changes .. 8 Clearing Reports .. 8 Applications .. 8 System Integration .. 8 Default 10 Changes to Collateral Management .. 12 Current NOS Model .. 12 New Model .. 12 Cash Collateral .. 12 Securities as Collateral .. 13 Bank Guarantees .. 13 Cross Market Collateral .. 13 Changes to the Settlement Solution.

2 14 Current NOS model .. 14 New model .. 14 Changes to the Rulebook and Agreements .. 15 NOS members that are not members OF NASDAQ OMX .. 15 NOS members that are members of NASDAQ OMX .. 17 Migration Timeline and contact details .. 18 NOS Clearing ASA Information on upcoming changes 3 IN T R O D U C T I O N Following the NASDAQ OMX Group, Inc acquisition of NOS Clearing ASA ( NOS ) 2nd July 2012, the process of integrating NOS into the acquiring entity, NASDAQ OMX Stockholm AB ( NASDAQ OMX ), is starting now. The objective is that NOS will be merged into NASDAQ OMX by the end of 2013 and the integration will be completed at the same time. The integration of NOS will allow NASDAQ OMX to move forward with the global strategy of NASDAQ OMX Commodities to grow in new markets. NASDAQ OMX and NOS will strengthen its offering to the global commodity markets and continue to develop the clearing services. This document is published to introduce and prepare the members for the migration process and the regulatory changes due to European Market Infrastructure Regulation ( EMIR ).

3 The information is aimed at those responsible for and involved in adapting NOS member organizations to the changes. The changes described in this document are necessary in order to continue as member with NASDAQ OMX and to comply with the new regulations. All changes will take place during Q4 2013 with the migration date currently planned to last week of November 2013. This document describes changes in the following areas for NOS members: NASDAQ OMX as your new counterparty Changes to the Default Fund Changes to the Collateral and Settlement Solution Changes to the Rulebook and Agreements Changes to the Technical interfaces and client applications Migration timeline Relevant information is included for readers representing following categories: Legal/compliance information about changes to merger, new Rulebook, agreements etc. Strategy/management information about changes that may affect business models and customer offerings Operations information about changes that will affect the operational processes and interfaces IT information about changes affecting systems and access to NASDAQ OMX systems This document is being sent to a large range of contacts at the member firms.

4 Please feel free to distribute the information further within your organization to anyone affected by the changes. Please also refer to our website for updated and more detailed information: NOS Clearing ASA Information on upcoming changes 4 In addition to the printed material and information on the website, NOS will be organizing meetings with our members, in order to present the upcoming changes and answer questions. Each member s Key Account Manager will assist with additional information to make the process as smooth as possible. The changes and proposal in the enclosed document are subject to regulatory consent or approval, as necessary. NOS Clearing ASA Information on upcoming changes 5 N A S DA Q O MX A S Y O U R C O U N T E R P A R TY TH E C L E A R I N G H O U S E NOS Clearing ASA will merge with NASDAQ OMX Stockholm AB, a wholly-owned subsidiary of NASDAQ OMX Nordic Oy, which itself is a wholly owned subsidiary of OMX AB.

5 NASDAQ OMX Stockholm AB is authorized by the Swedish Financial Supervisory Authority (the SFSA ) as a stock exchange and to conduct clearing operations. As a consequence of EMIR, NASDAQ OMX will have to carry out its clearing operations as a central counterparty ( CCP ), in an independent legal entity. The intention is therefore to demerge all operations not related to the CCP, mainly the stock exchange operations and transfer them to a separate entity. NASDAQ OMX Stockholm AB will apply for a new EMIR clearing license from SFSA and NOS Clearing ASA will be merged into the EMIR compliant clearing house, after the approval is received from SFSA. According to the current time schedule the application will be submitted in Q2 and approval is planned for Q4 2013. CL E A R I N G ME M B E R S H I P All NOS members will be migrated to and become members of NASDAQ OMX provided that the criteria for NASDAQ OMX membership and other criteria for migration are fulfilled at the time of migration.

6 This document will describe the criteria for migration and how to fulfill them. NASDAQ OMX has several types of memberships, but the most relevant memberships for existing NOS members are Clearing Member or General Clearing Member. For NOS members that are already members of NASDAQ OMX, the integration process will be easier, as the existing membership can be used for the NOS products after migration. NASDAQ OMX has two structures within the CCP, one for clearing financial products and one for clearing commodities. The rulebooks and memberships are different but the clearing model is to large extent harmonized. It is important to point out that members of NASDAQ OMX s financial market have access to commodities, while NASDAQ OMX Commodity members do not have access to the financial market More details on the required documents to sign for the different membership categories are found in the Rulebook section in this document.

7 There will be no annual membership fee for members clearing freight, iron ore, fuel oil, or seafood products with NASDAQ OMX. AC C O U N T S T R U C T U RE The current NOS account structure is supported in the NASDAQ OMX clearing model and all NOS members will be able to replicate the current account setup when it comes to position accounts, margin accounts and information accounts. The collateral and settlement account structure will be changed as a NOS Clearing ASA Information on upcoming changes 6 consequence of the regulatory changes and the new setup is described in the Changes to Collateral Management section of this document. NASDAQ OMX clearing model is designed to comply with the requirements in EMIR and offering structures that are efficient from the perspective of segregation, portability, operations and capital requirements. NASDAQ OMX offers segregation of positions, collateral and settlement. EMIR requires CCPs to enable clearing members to segregate positions and collateral on a house/clients basis (omnibus client segregation) and on a client-by-client basis (individual client segregation).

8 Clearing members are in turn required to segregate on a house/clients basis and to offer segregation on a client by client basis. PR O D U C T S C L E A R E D B Y N A S DA Q OMX ST O C K H O L M AB NASDAQ OMX currently offers clearing of equities derivatives and index derivatives on Swedish, Norwegian, Finnish, Danish and Baltic instruments; fixed income derivatives on Swedish, Norwegian and Danish underlying; commodity derivatives on Nordic power, emission rights, gas, German and Dutch power. After the merger with NOS, the NASDAQ OMX offering will include derivatives on freight, iron ore, fuel oil, electricity certificates and seafood. All NOS members migrated into NASDAQ OMX will have access to clear all commodity products offered by NASDAQ OMX, given that the appropriate agreements and arrangements for collateral and settlement are in place. EMI R A N D U P C O M I N G R E G U L A TO R Y C H A N G E S EMIR will support the mitigation of systemic risk related to the OTC derivatives market by mandating CCP clearing for contracts with a certain degree of standardization and impose additional risk mitigation standards for non-CCP cleared contracts.

9 There will also be reporting requirements that needs to be developed by the members. The clearing obligation will apply both to financial counterparties and non-financial counterparties who exceed certain thresholds, and will apply broadly to OTC derivatives, including commodity derivatives. EMIR came into force on August 16, 2012. However, the implementation consists of several steps with technical standards as the second step. The technical standards on various topics regarding the clearing obligation, central counterparty requirements and trade repositories were finalized by the European Securities and Markets Authority (ESMA) and the other European supervisory authorities on September 30, 2012 and put forward to the European Commission for adoption. Once the technical standards have been finally adopted, all CCPs must apply for reauthorization, and once a CCP has been authorized under EMIR, ESMA will consider whether to apply a clearing NOS Clearing ASA Information on upcoming changes 7 obligation to the derivatives cleared by the CCP.

10 More information regarding the time schedule is available on NASDAQ OMX is anticipating that the re-authorization will be concluded before end of 2013 and NOS will be merged in to an EMIR compliant CCP. NOS Clearing ASA Information on upcoming changes 8 IT C H A N G E S As part of the merger of NOS into NASDAQ OMX there will be IT changes and system replacements. The NOS Qepta Clearing system will be replaced by the NASDAQ OMX Genium INET system and all NOS products will be migrated to Genium INET. This means that the existing members of both NOS and NASDAQ OMX will be able to clear a broad range of products in several asset classes in the same technical system. Support personnel will be available before, during and after the migration period to ensure a smooth transition from the old to the new systems. CL E A R I N G RE P O R T S There will be changes to the clearing reports. All information in the current reports will be available in the new reports.