Glossary of terms

Role of the Clearing House

Term	Definition
Initial Margin	Collateral that must be in place with the GCM prior to the clearing house accepting the new trade.
Daily Variation Margin	Daily mark-to-market calculation between the daily settlement number and the trade rate; margin is paid or received.
Maintenance Margin	The ongoing minimum equity required to keep the position open.
Unscheduled Margin Calls	Intra-day payments are called if the clearing house sees a significant increase in volatility or the client’s position changes. Payments must be made the same day. If this is not possible, the GCM will close out some positions.
GCM Fees	Fees covering the services provided by the GCM, including collateral management and trade settlement.
Clearing House Fees	Charged by the clearing house on a trade-by-trade basis to compensate them for facilitating the execution and clearing of transactions. The clearing house will invoice the GCM, usually monthly, who will in turn invoice the trading client.
FFA Broker Commissions	Often as a percentage of the notional value of each trade, but can also be per ton or per container box. Usually invoiced monthly.
Final Settlement	End of month calculation between the settlement price (for example, the monthly average of the Baltic spot (physical) indices) and the fixed trade price; margin is paid or received. Will largely have been settled by the Daily Variation Margin above, leading to the end-of-month settlement.