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May 2011
What’s new
2
Combined limit
Combined limit
Combined collateral
Combined positionCombined risk management
For the participants, launch of the new Risk Management System (new RMS) means:
changes in the participants’ workplace interface
changes in the settlement algorithm of settlements (margin calls)
changes in reporting (combined end of day settlement certificate)
3
•Individual limits for transactions with different currency pairs (USD/RUB, EUR/RUB, EUR/USD) and instruments
•Separate exchange rate risk measurement for different currency pairs and instruments
•A combined risk limit for all transactions with partial coverage (USD/RUB, EUR/RUB, EUR/USD)
•Portfolio method: currency risks are assessed jointly in RUB
•The mark-to-market procedure is held at the close of the trading session or during the session
•A participant can set a “trading limit” on traders/client operations
Combined Risk limit
BEFOREBEFORE NOWNOW
Calculation of combined risk limit is based on:
•Current cash balance in RUB, USD, EUR
•Net claims and obligations for trades with partial and full coverage•Claims and obligations associated with open orders (placed, but not executed)•Part of the limit covered by Risk Fund•Obligations to the Clearing House
Combined limit cannot exceed a trading limit if it is set.
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•Different collateral requirements for USD/RUB, EUR/RUB, EUR/USD pairs
•Risk Fund covers only USD/RUB transactions
• EUR, USD, RUB are accepted as collateral for all USD/RUB, EUR/RUB, EUR/USD transactions
•Collateral assets are accepted at a discount depending on the risk of depreciation of the asset during two trading days (T+0 and T+1)
•Risk Fund covers USD/RUB, EUR/RUB, EUR/USD transactions
Combined collateral
BEFOREBEFORE NOWNOW
•Main risk parameters include: the upper and lower limits of the risk assessment range, the upper and lower limits of the price range, special MICEX currency rate.
•The collateral requirements for opposite TOD and TOM positions are calculated based on the SWAP price.
•The collateral rate is adaptive and may change during and after the trading session depending on the market volatility. It is calculated according to the Methodology of determining risk parameters of the MICEX foreign exchange market.
•The maximum collateral rate is 4% (30.04.2011).
Collateral rate requirements are expected to lower by 1.5 times
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Default management Mark to market procedure determines margin call parameters
All margin calls to be executed by 4 PM (T+1) by: Transferring additional collateral to NCC (the clearing organization) or
fulfilling obligations with the due date or
making trades that lead to an increase combined limit (reduce risk)
Failure to execute obligations leads to additional trading sessions:
The additional trading session of the first type (held at 4 PM) - compulsory close-out procedures – lead to closing of margin calls and previous day debt positions
The additional trading session of the second type (held at 8 PM) - if there are unfulfilled net obligations – result in SWAP trades with NCC or “donors“ (Bank of Russia)
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Trading schedule
Opening 10 AM
Closing in soft currencies (including the yuan) 11AM
Closing in in USD/RUB, EUR/USD and USD/RUB (TOD instruments) for the Fist Group 11AM
Closing in in USD/RUB, EUR/USD and USD/RUB (TOD instruments) for the Second Group 3 PM
Closing (TOM instruments) 5 PM*
All participants are divided into two groups: those who have sent a request to effect early settlements (First Group) those who have not sent a request to effect early settlements (Second Group)
* Trading hours to be extended to 7 PM since July 1, 2011