MICEX Derivatives Market Offers New Margining Possibilities
OREANDA-NEWS. January 20, 2011. As of January 19, 2010, the functionality of the risk management system in the MICEX Group’s derivatives market will be expanded. For the first time, the Russian on-exchange market has implemented the possibility of including inter-product spreads between futures on individual stocks and stock market indexes in the calculation of the size of the collateral for the portfolio of positions. This substantially reduces participants’ costs.
The possibility of including inter-product spreads in the calculation of the size of the collateral is a part of the basic functionality of the portfolio risk analysis system, Standard Portfolio Analysis of Risk (SPAN ®), which is the world standard of risk management of derivatives exchanges and clearing organizations and has been used in the MICEX Group’s derivatives market since April 2009. If the prices of derivative contracts of two different groups of instruments correlate with each other, then the negative variation margin for one type of contracts may be fully or partially offset by the positive variation margin for the corresponding positions in other contracts.
This effect is implemented by providing discounts on inter-product spreads. As a result, the final size of a participant’s collateral is significantly reduced while the overall reliability of the guarantee system of the on-exchange market is maintained.
“We, as a broker, highly appreciate these innovations of the MICEX,” said Anatoly Grigoryev, a representative of Zerich Capital Management and Head of Treasury. “The Exchange has reached a higher technological level in terms of instruments and the risk management system. The use of inter-product spreads will, of course, release additional funds and ease the strain on the collateral of the end trader (the client). We hope it will attract new players to the market.”