Repo with the CCP
(Risk Management System)
December 04, 2012
Moscow
Sergey Gorbachenko
Head of Clearing
CJSC JSCB National Clearing Centre
Main Principles of the Risk Management System
 Collateral needed to cover a Clearing member’s positions (the Single limit)
is estimated based on the online evaluation of market and interest rate
risks as well as marking to market of such positions.
 The worst alternative, i.e. that one with the lowest level of position
coverage is chosen taking into account entered orders.
 Assessment ranges for market and interest rate risks for each security is
computed based on historical simulation with exponential weighting.
 In order to consider the concentration risk 3 levels of market and interest
rate risks corresponding with increased collateral requirement for
increasing position are applied.
2
Concentration limits
Collateral requirement
Standard level
Increased level
Limit 1
Prohibitive level
Limit 2
Position size
Concentration limits:
 applied to consider the concentration risk associated with positions.
 are determined for market and interest rate risks (3 levels).
3
Risk parameters
Repo trade price
Term
Risk parameters:
 the calculated price (of shares
and bonds that involved into trades
with partial collateral):
• for shares – closing price on
the spot market;
• for bonds – the comparative
method (static Z-spread).
 the calculated repo rate (the
weighted average repo rate or the
Repo rate indicator).
 Market risk rate and interest
risk rate (method of adaptive rates
with predefined level for
confidence probability and
estimation horizon).
Upper and Lower limits of the
Assessment range for market and
interest rate risks (using the
relevant Risk Rates).
One
day
Calculated
repo rate risk
Lower
Limit
Calculated
price
Upper
Limit
Security
price
4
Time Table for the Risk Parameters Calculation
Number of changes is restricted
as per the FFMS’s regulatory act
(concerning trading suspension
Possible change in risk parameters
Price
After hours trading
Global markets
News
Upper Limit
Upper Limit
Calculated price
Calculated Price
Lower Limit
Lower Limit
10:00
19:00
23:50
Calculation of
risk parameters
for the next day
10:00
Time
5
Time Table for the Risk Parameters Calculation
Calculation of
risk parameters
for the next day
Public Holiday
in the Russian
Federation
Monday
10:00
Tuesday
Wednesday
10:00
10:00
Changes in risk parameters
are possible
(reduction of collateral requirements)
Thursday
10:00
Friday
10:00
Time
6
Life Circle of a Trade
Trading day on 21.11.12
Security’s risk parameters:
Lower limit of the market risk
assessment range, [RUB/security]
Calculated price,
[RUB/security]
Upper limit of the market risk
assessment range, [RUB/security]
8
10
12
Interest rate risk and the concentration limits are
not included in calculation of collateral (the Single
limit) in this example for clarity
Parameters of the trade:
Settlement date: T+2 (23.11.12)
Direction: sell
Number of securities: 10
Price: RUB10 per security
Clearing member’s positions after the trade:
Securities [units]
Cash [RUB]
Obligations (T+2)
-10
+100
Collateral
0
26
Net position
-10
+126
Single limit
-10*12+126=6
7
Life Circle of a Trade
Trading day on 22.11.12 (10:00)
Security’s risk parameters:
Lower limit of the market risk
assessment range, [RUB/security]
Calculated price,
[RUB/security]
Upper limit of the market risk
assessment range, [RUB/security]
9
11
13
The Single limit of the Clearing member is < 0.
Collateral is insufficient.
At 10:00 the Margin call containing the demand to
recover position coverage by 17:30 is send to the
Clearing member.
Clearing member’s positions:
Securities [units]
Cash [RUB]
Obligations (T+2)
-10
+100
Collateral
0
26
Net position
-10
+126
Single limit
-10*13+126=-4
8
Life Circle of a Trade
Trading day on 22.11.12 (17:30)
Security’s risk parameters:
Lower limit of the market risk
assessment range, [RUB/security]
Calculated price,
[RUB/security]
Upper limit of the market risk
assessment range, [RUB/security]
9
11
13
Parameters of the trade to be closed out mandatory:
Settlement date: T+2 (24.11.12)
Direction: buy
Number of securities: 5
Price: 12 RUB/security
The Margin call has not been executed by the
Clearing member.
Market risk associated with the Clearing
member’s positions are to be satisfied mandatory.
After the mandatory satisfaction the Single limit is
>0 and collateral is sufficient.
Clearing member’s positions after the trade:
Securities [units]
Cash [RUB]
Obligations (T+2)
+5
-60
Obligations (T+1)
-10
+100
Collateral
0
26
Net position
-5
+66
Single limit
-5*13+66=1
9
Life Circle of a Trade
Trading day on 23.11.12 (17:00)
Security’s risk parameters:
Lower limit of the market risk
assessment range, [RUB/security]
Calculated price,
[RUB/security]
Upper limit of the market risk
assessment range, [RUB/security]
9
11
13
Repo trade parameters:
Term: one day
Direction: buy/sell
Number of securities: 10
Haircut: RUB2,
Price: -0.2 RUB/security
There is an insufficient amount of assets for
settling matured trade (there is a shortage of
securities).
A repo trade under which the obligations are rolled
over to the next day should be executed with the
Clearing member.
Clearing member’s positions after the trade:
Securities [units]
Cash [RUB]
Obligations (T+2)
+5-10=-5
-60+(10*90)-(10*0,2)=28
Obligations (T+0)
-10+10=0
+100-(10*9)=+10
Collateral
0
26
Net position
-5
+64
Single limit
-5*13+64=-1
10
Life Circle of a Trade
Trading day on 23.11.12 (17:00)
Security’s risk parameters:
Lower limit of the market risk
assessment range, [RUB/security]
Calculated price,
[RUB/security]
Upper limit of the market risk
assessment range, [RUB/security]
9
11
13
The obligations termination procedure resulted in
that RUB10 were credited to the cash account of
the Clearing member,
as:
on 21.11.12 it sold 10 securities for RUB10 each,
on 23.11.12 it bought 10 securities for RUB9 each.
Clearing member’s position:
Securities [units]
Cash [RUB]
Obligations (T+2)
-5
+28
Obligations (T+1)
0
0
Collateral
0
36
Net position
-5
+64
Single limit
-5*13+64=-1
11
Life Circle of a Trade
Trading day on 24.11.12 (10:00)
Security’s risk parameters:
Lower limit of the market risk
assessment range, [RUB/security]
Calculated price,
[RUB/security]
Upper limit of the market risk
assessment range, [RUB/security]
9
11
13
The Clearing member transferred 5 securities to
the Collateral section
Clearing member’s position:
Securities [units]
Cash [RUB]
Obligations (T+0)
-5
+28
Collateral
5
36
Net position
0
+64
Single limit
64
12
Life Circle of a Trade
Trading day on 24.11.12 (17:00)
Security’s risk parameters:
Lower limit of the market risk
assessment range, [RUB/security]
Calculated price,
[RUB/security]
Upper limit of the market risk
assessment range, [RUB/security]
9
11
13
The obligations termination procedure resulted in
that 5 securities were debited from the Collateral
section of the Clearing member while RUB28
were credited to its cash account.
Clearing member’s position:
Securities [units]
Cash [RUB]
Obligations (T+0)
0
0
Collateral
0
64
Net position
0
+64
Single limit
64
13
Zero Coupon Yield Curve
Zero Coupon Yield Curve Base,
effective from 17.09.2012
Zero Coupon Yield Curve ZCYC
No
Bond
State Registration Number
1
OFZ 25065
25065RMFS
2
OFZ 25068
25068RMFS
3
OFZ 25071
25071RMFS
4
OFZ 25072
25072RMFS
5
OFZ 25075
25075RMFS
6
OFZ 25076
25076RMFS
7
OFZ 25077
25077RMFS
8
OFZ 25078
25078RMFS
9
OFZ 25079
25079RMFS
10
OFZ 25080
25080RMFS
11
OFZ 26202
26202RMFS
12
OFZ 26203
26203RMFS
13
OFZ 26204
26204RMFS
14
OFZ 26205
26205RMFS
15
OFZ 26206
26206RMFS
16
OFZ 26207
26207RMFS
17
OFZ 26208
26208RMFS
18
OFZ 46017
46017RMFS
19
OFZ 46018
46018RMFS
20
OFZ 46020
46020RMFS
21
OFZ 46021
46021RMFS
The Zero Coupon Yield Curve (G-curve) calculated by the Moscow Exchange is determined on the basis of trades in
government bonds. It used as a benchmark for risk-free borrowing costs on the Russian debt market. The G-curve
is a continuous representation of interest rates against a term that is applied to set prices for debt instruments and
manage interest rate risks. The G-curve is computed on a real time continuous basis during the trading sessions as
trades in bonds included into the curve’s base are executed.
1
4
Disclaimer
This presentation has been prepared and issued by Open Joint Stock Company “Moscow Exchange MICEX-RTS” (the “Company”). Unless otherwise
stated, the Company is the source for all data contained in this document. Such data is provided as at the date of this document and is subject to change
without notice.
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of any offer to buy or subscribe for, any securities, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection
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Company.
The information in this document has not been independently verified. No representation or warranty, express or implied, is made as to, and no
reliance should be placed on, the fairness, accuracy or completeness of the information or opinions contained herein. None of the Company, or any of its
subsidiaries or affiliates or any of such person's directors, officers or employees, advisers or other representatives, accepts any liability whatsoever
(whether in negligence or otherwise) arising, directly or indirectly, from the use of this document or otherwise arising in connection therewith.
This presentation includes forward-looking statements. All statements other than statements of historical fact included in this presentation, including,
without limitation, those regarding our financial position, business strategy, management plans and objectives for future operations are forward-looking
statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results,
performance, achievements or industry results to be materially different from those expressed or implied by these forward-looking statements. These
forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we
expect to operate in the future. Important factors that could cause our actual results, performance, achievements or industry results to differ materially
from those in the forward-looking statements include, among other factors:
• perception of market services offered by the Company and its subsidiaries;
• volatility (a) of the Russian economy and the securities market and (b) sectors with a high level of competition that the Company and its subsidiaries
operate;
• changes in (a) domestic and international legislation and tax regulation and (b) state policies related to financial markets and securities markets;
• competition increase from new players on the Russian market;
• the ability to keep pace with rapid changes in science and technology environment, including the ability to use advanced features that are popular with
the Company's and its subsidiaries' customers;
• the ability to maintain continuity of the process of introduction of new competitive products and services, while keeping the competitiveness;
• the ability to attract new customers on the domestic market and in foreign jurisdictions;
• the ability to increase the offer of products in foreign jurisdictions.
Forward-looking statements speak only as of the date of this presentation and we expressly disclaim any obligation or undertaking to release any
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conditions or circumstances on which these forward-looking statements are based.
15
THANK YOU FOR YOUR INTEREST IN
MOSCOW EXCHANGE!
Contact:
Phone: +7 (495) 363-32-32, ext. 11-94
Email: Gorbachenko@micex.com
Website: http://www.nkcbank.com/