Eligible collateral

Australian Clearing House (ACH) accepts cash and a range of collateral to cover an investor's margin obligations.

Collateral can be used to cover margins for options, risk margins for LEPOs, and initial margins for futures. Collateral can not be used to cover mark to market margins for LEPOs or variation margins for futures. These margins must be covered with cash.

Shares bought on margin may be eligible as collateral for written call option strategies. Please refer to Covered call writing for margin investors for more details.

In order for your broker to be able to lodge collateral for you with ACH, you are required to sign the Addendum to the Derivatives Client Agreement (DCA). In this addendum, you acknowledge that you have read and understand certain operating Rules of ACH. These Rules relate to Cover and Default.

The following links take you to the relevant sections of the ACH Clearing Rules that relate to Cover and Default:

You are also able to offset the credit premium of bought option positions against initial margin liabilities for ASX traded futures contracts.

There are three different types of securities which ACH has approved as acceptable collateral to meet margin obligations. These are:

1. ASX traded securities

ACH accepts shares and other securities in a number of entities listed on ASX. For all CHESS approved securities these must be held as a Broker Sponsored holding. ACH does not accept Issuer Sponsored holdings or certificates for CHESS approved securities.

Shares and other ASX securities accepted by ACH as collateral fall into three tiers or categories as follows:

Tier 1 - Securities which are currently approved as underlying securities for options trading or securities which are able to meet ASX's criteria for approval as underlying securities but are not currently traded on the options market and which meet general liquidity requirements.

Tier 2 - ASX traded securities (other than fully paid ordinary shares) of companies whose ordinary shares are eligible as collateral under Tier 1 provided these securities meet general liquidity criteria.

Tier 3 - Instalment Warrants Collateral, which must:

  • be over stocks that satisfy the ETO eligibility criteria;
  • be broker sponsored;
  • be issued under a covered warrant structure;
  • immediately be removed as collateral cover:
    • upon exercise
    • at the beginning of the rollover period for a rolling instalment warrant; and
    • 5 business days prior to expiry.

To protect against a sudden fall in the value of collateral held, ACH will value securities at less than their market value. This reduction is known as a "haircut".

Generally haircuts of between 20-50% may be applied, depending on the Tier and specific security. Haircuts will be applied to the value of securities lodged as collateral. In extreme cases higher haircuts may be applied or the security may be removed from the list of eligible collateral and all lodgements will be removed.

List of Traded Options and Acceptable Collateral (PDF 46KB)

List of Instalment Warrants as Collateral (PDF 209 KB)

2. Bank Guarantees

ACH accepts bank guarantees as collateral from ACH approved banks.

List of Bank Guarantees (PDF 39KB)

3. Austraclear Pledged Securities

ACH accepts certain money market securities which have been lodged with Austraclear and pledged to ACH.

Acceptable securities include:

  • bank negotiable certificates of deposit
  • bank transferable certificates of deposit
  • non-bank promissory notes or certificates of deposit
  • bank bills of exchange
  • non-bank bills of exchange

4. Stock bought on Margin

ACH accepts stock bought on margin as specific collateral for written option positions. This is available with selected margin lenders.