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Initial Margin

Initial Margin

To ensure fulfillment of obligations under the futures contract the Clearing Member (both the buyer and the seller) shall contribute the initial margin to the account of SDCO (JSC) as individual guarantee collateral. The initial margin is a special repayable contribution which may be used by the Clearing Organization to reimburse for the losses incurred in respect of the positions of such Clearing Member if it does not fulfill its obligations to pay the variation margin (forfeits, penalties fines) (see article 04.02 of the Clearing Rules). The posted initial margin in respect of the position portfolio shall be equal to sum of the following values: the posted margin calculated in accordance with the SPAN methodology (SPAN requirement); the loss accrued on the variation margin; the preliminary delivery margin.

SDCO (JSC) shall set the posted initial margin in accordance with the SPAN (Standard Portfolio Analysis of Risk) methodology on the basis of the license issued by Chicago Mercantile Exchange Inc.

For a segregated position SPAN requirement shall be a product of the respective Scan Range (collateral rate) by the contract size. The scan range shall depend on the margining level established for the position register portfolio within which the position is opened.

In respect of opposite positions under futures contracts calendar (intraproduct) spread may be formed for one underlying asset with different performance periods. This is related to the fact that such positions shall partially balance each other: change in the futures contract cost with one and the same performance date shall be as a rule arranged in accordance with change in futures cost for the same asset with another performance date. The amount of surcharge for the calendar spread (spread rate) shall depend on the duration of unexpired performance period of the futures with the nearest performance date and on duration of the timeframe between performance dates of the futures constituting the spread.

Besides, interproduct spreads may be formed between the positions under futures contracts concluded for different underlying assets if there is a high correlation between price changes in respect of such futures contracts. Discounts for SPAN requirement shall be provided for formation of interproduct spreads.

Presentation of the SPAN methodology may be found here.

Actual values of Scan Ranges, pairs of futures contracts forming spreads and values of spread rates (surcharges for calendar spreads and discounts for interproduct spreads) in respect of each pair shall be specified in the SPAN file published daily and in the description of the RMS Parameters.

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