New Risk Management System
On May 16, 2011, as a result of launching the project “The new system of risk management in the MICEX foreign exchange market”, changes were made in the technology for controlling limits, maintaining positions and calculating obligations and claims of participants. As a result of adopting the new technology for trading and clearing, changes took place in the interface of the workplace and new reporting documents appeared.
The goal of the project “The new system of risk management in the MICEX foreign exchange market” is to reduce the costs of participants in the MICEX foreign exchange market relating to conducting trades in this market and limit the risks of participation in trading by:
- enabling participants to conduct trades in any of the main currency pairs (USD/RUB, EUR/RUB, EUR/USD), using as collateral one of three currencies, USD, Euro, RUB, or any combination of these (single collateral);
– using the limit secured by the funds of the Risk Coverage Fund (the analog of the limit of net operations) for transactions in pairs USD/RUR, EUR/RUB and EUR/USD for the banks participating in the Risk Coverage Fund;
– optimizing participants’ payments as a result of calculating, on the basis of clearing, one final net obligation or final net claim in each currency;
– using the portfolio approach, that takes into account calendar spreads, when calculating the required collateral against trades concluded on the MICEX foreign exchange market;
– synchronizing the time of the end of trading in currency pairs USD/RUB, EUR/RUB and EUR/USD and the fulfillment of obligations following clearing in the UTS for Moscow and regional participants in the MICEX foreign exchange market.
The main components of the project:
- Market participants make trades in the instruments of currency pairs USD/RUB, EUR/RUB and EUR/USD against unified collateral consisting of rubles, US dollars and/or Euros. The collateral is evaluated in rubles at the upper and lower thresholds of the risk assessment range for currency pairs USD/RUB, EUR/RUB, established in accordance with the documents of the National Clearing Centre.
- In the clearing system, a unified limit is calculated in rubles to conduct trades in all currency pairs: USD/RUB, EUR/RUB and EUR/USD.
A participant’s unified limit is calculated based on the valuation, in Russian rubles, of the collateral provided by the participant in trading. Unified limit for participants in the Risk Coverage Fund is increased by the amount of the limit secured by the funds of the Risk Coverage Fund. - When a participant enters an order, the adequacy of the participant’s unified limit for the purchase (sale) of the instrument is checked. If the size of the unified limit, taking into account the entered order, does not become negative the order is accepted, otherwise it is rejected.
Following the results of trading participants receive one exchange certificate containing information on final net obligations and/or final net claims in each currency, calculated on the basis of clearing trades in currency pairs USD/RUB, EUR/RUB and EUR/USD and also trades in “soft” currencies.