Segregated accounts Derivatives Market

2 Segregated account 1)Segregating an account means opening the segregated clearing register or a segregated group of clearing registers (the segregated brokerage company) for a client or a group of clients. 2)Initial Margin (IM) for positions of a segregated brokerage company is calculated separately from IM for positions of other clients or the clearing member itself. 3)Assets of a segregated brokerage company cannot be used to satisfy obligations when somebody else’s positions are being mandatorily closed out by the exchange, but for the positions of the segregated brokerage company itself. 4)Assets of a segregated brokerage company can only be withdrawn to accounts assigned to this particular segregated brokerage company. 5)Assets of a segregated brokerage company can only be withdrawn by the account owner of the accounts assigned to the segregated brokerage company’s register.

3 Target group The segregated account service allows for providing access to the exchange’s derivatives market to clients being sensitive to the credit risk associated with Russian brokers such as:  non-resident clients (including international brokers);  major resident clients (including asset managers of investments funds and non-state pension funds, and non-financial institutions). This enables Russian brokers to attract new large customers and offer a wider range of technologically advanced services.

4 Separate accounting of assets  IM for positions of a segregated brokerage company is calculated separately, i.e. there is no netting of the segregated brokerage company’s risks against the risks of the Clearing Member or its clients.  This means that a segregated brokerage company can use its available funds to open new positions or withdraw assets even if there is a margin call at the Clearing Member’s level (including when the NCC Clearing Bank suspends the Clearing Member from trading).  A ban on trading can only be invoked against a segregated brokerage company if: IM for segregated brokerage company’s open positions is higher than the funds available in the account; the Clearing Member has a margin call which resulted in a mandatory closure of Clearing Member’s positions, usage of the Guarantee Fund reserves and consecutive need to mandatorily close segregated brokerage company’s positions.

5 Separate safekeeping of assets (IM)  Separate safekeeping of securities is available within a standard depository services package (NSD sets up accounts for the owner of the securities);  Separate safekeeping of cash (including foreign currency) is available through assigning accounts for withdrawal of cash to the segregated brokerage company’s register/registers;  The segregated brokerage company itself or any other approved (by the segregated brokerage company) legal entity (for example, a big international bank) may act as an authorized account owner of accounts for withdrawal of cash;  Both Russian residents and non-residents may be authorized account owners;  An Authorized Account Owner must sign an agreement with NCC Clearing Bank (NCC).  An Authorized Account Owner can assign accounts to a segregated brokerage company, submit instructions to send/withdraw cash and trigger transfer of the segregated brokerage company’s positions to another clearing member, if necessary.

6 Risk management 6 Clearing member’s margin call Segregated brokerage company’s margin call Actions NoYes The clearing member interacts with the segregated brokerage company in accordance with its own brokerage rules. Involvement of NCC is not required. Yes NCC mandatorily closes out segregated brokerage company’s positions together with positions of the clearing member and its clients in accordance with established rules. Once segregated brokerage company’s available funds are above zero, mandatory closing out stops. YesNo The segregated brokerage company continues normal trading activity. BUT, in case Member Firm’s contribution to the Guarantee fund was used to repay the Clearing Member’s margin call and cover the debt, and the Member Firm failed to replenish its contribution within one day, NCC will close out segregated brokerage company’s positions completely. Please note:  Authorized Account Owner can always withdraw segregated brokerage company’s available funds if instructed by the segregated customer.  Authorized Account Owner can initiate transfer of segregated brokerage company’s positions and collateral to another Clearing Member to avoid mandatory close out.

7 Liquidity management Cash “credits” during trading A Clearing Member can set a virtual trading limit for a segregated brokerage company in the trading system if the segregated brokerage company experiences a brief liquidity shortage, for example, when trading limits are being increased during a trading session. The virtual limit will set to zero during the next evening clearing session. Cash in virtual limit cannot be withdrawn. A Clearing Member can change the status of the limit from virtual to actual, if the clearing member is certain it will receive money from the segregated brokerage company and /or they will be deposited to another account. In this case funds will be transferred during the next evening clearing session. Liquidity management OPPORTUNITIES Moving cash during clearing Segregated brokerage company =

8 Cash funds DepositingWithdrawal Any person may deposit cash to the segregated brokerage company’s registers Cash may be withdrawn only to the registered bank accounts by an instruction from an authorized account owner.

9 Registration of segregated brokerage companies (option 1)

10 Registration of segregated brokerage companies (option 2)