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RUS

Posted Initial Margin

SPAN requirement (posted 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:

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. To calculate the posted margin two sets of parameters shall be determined: one for standard margining level for portfolios of position registers and the other for the increased margining level for portfolios of position registers. The margining level for the portfolio of position registers shall be established by the Clearing Member on its own for each portfolio of position registers according to article 06.02 of the Clearing Rules. The posted initial margin for the position portfolio pursuant to the SPAN® methodology shall be calculated using a set of rates correspondent to the margining level established by the Clearing Member for this portfolio of position registers.

For a segregated position SPAN requirement shall be a product of the respective Scan Range (collateral rate) by the contract size. 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 stated in the SPAN file published daily and in the description of the RMS (Risk Management System) Parameters.

Loss accrued on the variation margin

The loss accrued on the variation margin shall be calculated on a real-time basis according to the intraday transactions carried out by the Clearing Member and its amount shall depend only on the prices and sizes of transactions concluded by this Clearing Member. In this regard in the course of the Clearing Session the loss accrued on the variation margin shall always be equal to zero. Accounting of the accrued loss shall provide an opportunity to account for the damage or profit gained as a result of scalpers’ transactions. The formula for calculation of the loss accrued on the variation margin is given in article 04.02 of the Clearing Rules.

Preliminary delivery margin

Preliminary delivery margin shall be collected for the positions under those series of deliverable futures contracts for which delivery is to be performed in the nearest future according to the date specified in the specification of the traded contract. Its amount shall be equal to sum of products of the rate established for the preliminary delivery margin by the number of positions within each position register. Establishment of the rate for the preliminary delivery margin leads to gradual increase in the required collateral amount as the contract performance date approaches. The formula for calculation of the posted preliminary delivery margin is given in article 04.02 of the Clearing Rules.

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