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      Guarantee systems

      By means of holding collateral was, and always is to comply with predefined rules with realisation of contracts. Banks with the opening of letter of credit by buyer requires performence bond by the supplier. Performence bond which is released to the buyer when something does not go fine. CEB creates rules similar to letter of credits used by bank, but the exchange has advantage that it focus on trading and has better know how, therefor the processes are more simple, quicker and cheaper.

      CEB uses several set of rules and processes to manage the contracts. CEB for every exchange member or his client creates account for money and for storagable commodities such as carbon credits. Different guarantee systems differs mainly in using of collateral required to hold on the settling account before one can insert order into the system.

      GS1 SPOT - Guarantee system 1 - this guarantee system is historically the oldest. It was introduced in 1992, and main point is that every contract party must have on the account 2-5% collateral before they can place the order into the system or create contract. The contract must be settled usually within 2 business days.

      GS2 SPOT - Guarantee system 2 - was created primarly for trading carbon credits. GS2 requires traders to do full prepayment or predelivery to the settling account before trader can place order. This strict rule means that every time someone see the GS2 order in the system, he can be assured that if he trades it, he will receive money or commodity right away on his account. Trading at guarantee system 2 is with zero time delivery, zero time payment and zero risk.

      GS3 SPOT - Guarantee system 3 - OTC - when traders does not want to hold any collateral on the account before they create a contract, they can use GS3 system. No collateral means no security for trading therefore the clients can agree all conditions of trade even after they create OTC contract. CEB recommends to do the settlment and delivery through the settling account, but it is not a condition.

      GS1 MON - Guarantee system 1 for forward contracts - No prepayment or predelivery is required before placing order. After contract is agreed, both parties must hold 2-5% collateral, that will be hold on the settling account till the contract is fully settled. When one party does not fullfill contract, the sanction 100% of the contract value is inflicted upon him.

      GS3 MON - Guarantee system 3 (OTC) for forward contracts - No prepayment or predelivery is required before placing order. After contract is agreed, both parties must hold agreed collateral on the settling account. If they agree, they will have to settle the contract throght the settling accounts.

      Note: Detail description of guarantee systems are available in the exchange rules..

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