Basic Elements of the Risk Management System in the MICEX Futures Market
On April 13, 2009 a new risk management system was put into operation in the MICEX Futures Market.
The MICEX Futures Market’s development strategy includes designing a new risk management system (RMS) by gradually introducing progressive risk management elements that comply with international standards. The main advantage of the new RMS is the considerable reduction of market participants’ transaction costs while maintaining the reliability and increasing the efficiency of the security system.
The new RMS includes the following elements:
- portfolio margining (determining the required security deposit amount for futures positions), based on the SPAN® methodology – the world standard in the field of risk management for exchanges and clearing organizations;
- designing a guarantee fund system;
- implementing market regulation mechanisms for insolvency;
- introducing net-margining of clearing participants’ position portfolios;
- designing a system of evaluating clearing participants’ credit quality.
Further RMS improvements will ensure:
- accepting assets other than rubles in cash (monetary resources, securities etc.), taking into account their market liquidity, as security deposits for open positions;
- setting up and introducing a Collective Fund оf clearing participants’ resources in the guarantee fund system;
- offering additional clearing sessions and raising or lowering margin requirements for clearing participants;
- launching an options market with different types of settlements (conventional and futures);
- offering the dynamic transfer of exchange and monetary assets among trading accounts of exchange, monetary, and futures markets;
- using request-for-quotes procedures– RFQ – in combination with the elimination of a number of price- and procedure-oriented restrictions to regulate clearing participants’ insolvency.
