NCC Clearing Bank, part of Moscow Exchange Group (MOEX), has announced that it plans to introduce collateral for stress as an additional layer of its central counterparty (CCP) safeguard structure.
The move will facilitate the continued development of risk management and clearing systems as well as bringing the CCP’s operations in line with international best practices.
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Collateral for stress is the difference between a clearing firm’s potential losses under the stress scenario and funds to be used in the event of default by the clearing firm in accordance with its clearing rules. It will be set based on the risk of clearing firms’ positions that are not covered by their individual clearing collateral, or by existing collective funds and NCC dedicated capital.
The first calculation of collateral for stress will be on 28 June 2016. Following this, clearing firms exceeding the established limit (RUB 500,000) will receive a margin call, to be fulfilled within five working days. Firms failing to meet the deadline of 5 July 2016 will receive a margin call to be fulfilled in accordance with the clearing rules.
Applicable On FX, Equity and Bond, and Derivatives Markets
Collateral for stress will apply on the FX, equity and bond, and derivatives markets. It will be recorded as a part of firms’ individual clearing collateral used to ensure settlement of trades without full collateral required.
RUB, EUR, USD and OFZs will be acceptable as collateral for stress. Collateral for stress in RUB and foreign currency will earn interest at a rate set by NCC Clearing Bank. Collateral requirements will be reviewed weekly.