Guarantee System Parameters

Download the RMS Parameters File

This file is designed for use in the MICEX Margin Calc FO program.

Description of Risk Management System Parameters

The main parameter of the RMS in the MICEX Futures Market is the general level of reliability, indicated by the probability of an event requiring the complete application of resources from guarantee funds, which are accessible during a forced liquidation of the positions of Clearing Participants who have not met their obligations (defaulters). The value of this parameter is determined by the MICEX CJSC Board. Based on this value, the following RMS parameters or risk parameters are calculated:

• scan ranges;
• modification limits for prices of futures instruments;
• extended price modification limits (Limit 2 and Limit 3), used if providing a possibility of concluding transactions in increased volatility situations is needed;
• maximum relative approximation of rates to limits, used to indicate increased volatility;
• spread positions (calendar spreads);
• spread rates;
• spread priorities;
• delivery margin rates;
• maximum permissible deposit margin sizes;
• market share limits subject to the futures instrument type.

Risk parameter values are calculated after each trading session during the clearing session.

Scan Range

Scan ranges are modification limits for the price of a futures instrument within two trading days and are established with a certain value of probability that the price does not exceed these limits.

Scan ranges are calculated separately for all types and series of futures instruments. Scan ranges are calculated on the basis of historical information about prices of futures instruments of the same type or historical information about prices of the corresponding underlying asset. The selection rests on the expert evaluation of the volume, quality, and other information about the prices of a futures instrument and its corresponding underlying asset.

Price Modification Limit

The price modification limit is the maximum permissible price tolerance of transactions that can be executed by virtue of an application with regard to a certain series of futures instruments, from a settlement price fixed for the present series on the previous trading day. If the price indicated in the application does not correspond with the price modification limit effective at the filing date, the trading system will not accept this application.

A futures instrument price modification limit is equal to the highest absolute value of the difference between the limiting values of the scan range and the settlement price fixed during the previous trading session. The time interval for which a scan range is estimated is then reduced to one day.

For cases of increased volatility, after price modification limits are reached (price “blocking” for limits) by futures instrument prices two additional price modification limits – Limit 2 and Limit 3, as well as the value of the maximum relative approximation of rates to limits are calculated:

• Limit 2 and Limit 3 are determined by increasing the price modification limit by coefficients established by the MICEX CJSC Board;
• The value of the maximum relative approximation to the application limits is equal to 0.95 for all series of futures contracts, therefore:
  • The relative approximation of the sales application limits is the relationship between the difference between an application and the settlement price of the previous trading day and the value of the price modification limit;
  • The relative approximation of the sales application limits is the relationship between the difference between the settlement price of the previous trading day and the application price and the value of the price modification limit.

Spread Rates and Priority

Spread rates are the monetary evaluation of the price modification inconsistency of different futures instruments series of the same type.

Spread rates are calculated separately for all types and series of futures instruments. The spread rates are calculated on the basis of historical information about the prices of futures instrument series of the same type or by virtue of historical information about forward interest rate. The selection method rests on the expert evaluation of the volume, quality, and other information about the prices of a futures instrument and its corresponding underlying asset or indicative interest rate values.

Spread priority is the procedure for extracting spread positions from a group of futures instruments that have an opposing trend (purchase / sale) and various performance dates. Spread priority is kept:

• for all possible calendar spreads: the spread with the lowest difference between the performance dates of its futures instrument series in relation to spreads with a higher difference between performance dates;
• for calendar spreads with equal difference between performance dates: the spread with a longer term until the performance of the nearest futures instrument series included in this spread in relation to spreads with a shorter term until the performance of the nearest series.

Delivery Margin Rate

The theoretical value of the delivery margin rate for a certain series of futures instruments is determined as the one-day price modification limit.

The delivery margin rate for a certain series of futures instruments is established on the basis of its theoretical value subject to potential additional expenses associated with delivery and is approved by the MICEX CJSC Board.

Maximum Permissible Deposit Margin Size

The requirement for a clearing participant’s deposit margin size for a group of positions is defined in accordance with SPAN® methodology on the basis of the following parameters:

• scan range;
• spread rate;
• spread priority;
• delivery margin rates.

The value of the maximum permissible deposit margin size for every Clearing Participant is established by the MICEX CJSC Board. The maximum permissible deposit margin size is subject to the financial stability and credit quality of a participant, estimated on the basis of the internal rating assigned by the Clearing Organization under consideration of the participant’s capital amount and international ratings.

Market Share Limit

The market share limit for a futures instrument type is the Clearing Participant’s maximum permissible share of net positions defined for the present type of futures instruments for a position account and all additional position accounts opened hereto, out of the aggregate net positions of one trend on all position accounts of all Clearing Participants for all series of futures instruments of that type. If the market share limit for the present type of futures instrument is violated by a Clearing Participant after submitting an application, the trading system will not accept this application.

The value of the market share limit depends on an expert evaluation of market stability, which is performed on the basis of the following rates:

• frequency of trading and volume of the participant’s positions;
• presence and activity of market-makers;
• market maturity grade of futures instruments of the present type.

The value of the market share limit for every type of futures instrument, as well as the correction thereof, is approved by the MICEX CJSC Board.