All members have to post collateral as a guarantee that they can pay for the contracts they have entered into. Collateral can be posted under different types of agreements which is described in further detail below. All such agreements have predefined templates which are published on the Nord Pool website under the Market Rulebooks.
Posting Collateral for members trading in the UK
The cash collateral account
The cash collateral account will be established by the Collateral Security Deed and maintained as a blocked, segregated account (pledged in favor of Nord Pool). No money may be withdrawn from the cash collateral account, except on the express instructions of Nord Pool.
The Letter of Credit
The Letter of Credit denotes a letter issued by a bank to serve as a guarantee for a buyer’s payment to Nord Pool.
The Bank Guarantee
The Bank Guarantee designates from the guarantor that the liabilities (or the payments) of a buyer will be met, should the buyer fail to settle its financial obligations.
All the above mentioned Collateral Agreements can be found under Rules and regulations, under section D.
Posting Collateral for members trading in Nordics, Baltics and Germany
All members trading on the Nord Pool Nordic, Baltic and/or German market must establish a Pledged Cash Account Agreement, Pledged Collateral Account Agreement or an On-Demand Guarantee to cover their collateral requirements towards Nord Pool.
Pledged Cash Account
The Pledged Cash Account agreement will be established and maintained as a semi-blocked account, this means that collateral will always be blocked on the account, but any amounts excessive of the collateral call can be withdrawn by the member without any consent by Nord Pool. The pledged account must be opened with an approved settlement bank. The pledged account can also be used for settlement of daily trades.
The Pledged Collateral Account
The Pledged Collateral Account agreement will be established and maintained as a blocked, segregated account (pledged in favor of Nord Pool). No money may be withdrawn from the cash collateral account, except on the express instructions of Nord Pool.
The On-Demand Guarantee
The On-Demand Guarantee is a bank guarantee that imposes a primary obligation on the guarantor to pay the beneficiary in first demand. The guarantee acts as security for the liabilities (or the payments) of a buyer towards Nord Pool.
All the above mentioned Collateral Agreements can be found under Rules and regulations, section D.
Bank Guarantees and Letter of Credit issuers must be registered within an OECD country. Please read our rating requirement document for guarantee and letter of credit issuers.
Margining and Collateral
Before a member starts to trade the member needs to meet the initial collateral call. This is calculated as the max net exposure a member trades during one delivery day together with a day factor of two. The minimum collateral level is set to EUR 30.000,- which means that the collateral call for all counterparts will never be below this level.
After the member has started to trade, Nord Pool calculates the member’s daily margin, this denotes the daily exposer the member has towards Nord Pool.
The Collateral Call is set as the maximum level of the Daily Margin that has been calculated for that member, looking back on the last 30 days. Members must meet their Collateral Call’s towards Nord Pool on a daily basis.
Monitoring of Collaterals
Members can monitor their Collateral Calls and Postings through the web-based clearing and settlement interface. After the settlement is run members will be able to check whether they are within their collateral limit, and whether they have to post more collateral within the payment deadline the following business day.
In the morning of the due date of the collateral call, members will be able to check their final cash position towards the collateral call to be met that business day.