Risk Management – Currency Market
| Currency Market risk management system | ||
|---|---|---|
| Freely convertible currencies | ||
| Trade organizer | MICEX-RTS | |
| Central counterparty | National Clearing Center (NCC) | |
| Clearing organization | National Clearing Center (NCC) | |
| Requirement system for participants | Special requirements for candidates and section members/trade participants Financial condition requirements |
|
| Limit system | Before the start of trading Combined Limit is computed for each participant. The following values are taken into account: – cash (Russian rubles, US dollars and euros) on member’s accounts in NCC; – limit provided by the means of Risk Coverage Fund (for Fund’s participants); – net-obligations and net-requirements of the participant in Russian rubles, US dollars and euros; – the amount owned by the member to the NCC; Combined Limit is recomputed when cash amount on member’s account is changed, when trading orders are submitted or trades are completed or cancelled. Combined limit for a participant can not exceed Trading limit (if it is set). Trading limit for a participant is set in the following cases: - if a participant forwarded a request to the NCC about setting Trading limit; - if NCC receives some negative information about participant financial condition it can make a decision to impose Trading limit on the participant; Price corridor Upper and Lower limits are set in order to limit currency rate changes. Trading orders beyond these limits are not accepted by the trading system. Central rate for each currency pair is determined according to Clearing Rules (Attachment 1). The purpose of Concentration limit is to restrict the volume of net-obligations (net-requirements) of the participant. It is expressed in the corresponding currency of net-obligations or net-requirements. If this limit is exceeded, the participant is required to bring additional margin in order to cover market liquidity risk. |
|
| Deposit System | Transactions in the “US Dollar\Ruble”, “Euro\Ruble” and “Euro\US Dollar” segments are conducted with partial preliminary deposit. This deposit covers the market risk up to Upper and Lower limits of risk assessment range. These limits are set such that currency exchange rate will be within these limits with certain confidence level over a close-out period. | |
| Dynamic management of deposited funds is allowed during the UTS Trading session. | ||
| Fund System | The Risk Coverage Fund (RCF) is created using participant contributions to cover market (rate) risks arising in connection with possible non fulfillment of obligations by fund participants, arising from transactions carried in the UTS in the “US Dollar/Rouble” segment. The RCF participation fee is set in the amount of $80,000. The purpose of the creation, formation procedure and expenditure of funds in the RCF is regulated by regulation of formation, placement and use of RCF funds of the National Clearing Center (RCF Regulation) |
|
| Settlement principle | Settlements with participants according to clearing results using the PVP (payment versus payment) principle. | |
| Settlement procedure in event of insolvency | Settlement of defaulting participant obligations resulting from transactions with partial deposit is performed by the NCC through additional trading sessions. There are 2 types of additional trading sessions. Additional trading session of the first type is performed in the following cases: – in case of non-payment of the margin call during the period set by the Clearing Rules; – in case of non-payment of obligations from the previous business day during the period set by the Clearing Rules; Additional trading session of the second type is performed in the following cases: - in case of partial or complete non-payment by the participant of final net-obligations; - in case Clearing Center funds are not sufficient for the settlement of final net-requirements of non-defaulting participants |
|
| Monitoring | Regarding participants | -compliance of participants to the set requirements defined in the Clearing Rules; -compliance of participants to the RCF requirements, defined in the RCF Regulations; -monitoring of credit quality and financial stability of participants, carried out on the basis of the definition of their internal ratings by means of assessment of a number of relevant financial and non-financial indicators of participant activity according to Internal rating determination methodology. |
| Regarding trades | -At the moment of trading order submission a Trade system check on the deposit sufficiency is carried out; -Continuous monitoring of trading and risks arising in connection with rate fluctuations (change of Upper and Lower limits of price corridor and of risk assessment range before and during trading; technical break in the UTS Trade session according to UTS rules) |
|