Rights and obligations fulfillment of transaction Stock Option (KOS) transaction is divided into two, namely cash and physical settlement. Cash Settlement is done on the following trading day of the transaction occurs (T+1) in the amount of the premium. This settlement is done through a payment bank appointed by AK. Second, the physical settlement of transactions is carried out in the event of exercise/assignment, with settlement date 2 trading days after the transaction occurs (T+2), and netted with equity transactions.
For cash settlement, the fulfillment of fund payment is done by cash book-entry from AK’s Collateral Account or Settlement Account and/or Settlement Account to KPEI at 12:30. Meanwhile, the fulfillment of AK’s fund receipt rights from KPEI is done by transferring funds to AK’s collateral account and/or Settlement Account no later than 14:30. This Premium settlement process is conducted in Derivatives Clearing and Settlement System. Meanwhile, exercise / assignment transaction data will be sent to the EAE system to be netted with equity transaction and settled physically. Securities and cash book-entry processes, mechanisms and timeframe resulting from exercise/assignment transaction will follow equity transactions’ in EAE.
If at the settlement time, AK can not meet its obligations due to insufficient funds in the Collateral Account, KPEI is entitled to use the Guarantee Fund owned by AK. However, if the Guarantee Fund owned by AK is also insufficient, AK is declared to be in default. Next, AK is obliged to cover open positions belonging to clients and AK by closing its contracts with the opposite positions, either by selling or buying stock option (called offsetting transactions) or by switching the open positions held AK’s clients to another AK.
KPEI Rule Number IV governing Stock Options Transactions Clearing and Settlement Guarantee can be accessed here.