Risk Management

Spot gas products can be traded on the Trading Platform. In the Balancing Gas Market, balancing transactions are created on the basis of imbalance positions. FGSZ as system operator guarantees physical gas delivery and KELER CCP guarantees the cash side. Products of non-financial nature are traded on the TP and Balancing Gas Market, thus it is not covered by EMIR.

The cumulated net financial position, i.e. whether the market participant is net payee or payer, is calculated by clearing days based on the trades made by the Clearing Member. On each clearing day the financial result of the given Clearing Member, i.e. whether it has payables or receivables, is determined for the relevant clearing period. Financial liabilities are to be met within the deadline stated in the General Business Rules on each settlement day. If a Clearing Member fails meet the financial liabilities, KELER CCP as guarantor has to ensure that purchase price is settled.

The financial result is settled by clearing members on a net basis.

Financial settlement is performed on the payment account maintained by Settlement banks, regardless of any complaints, later corrections.

The purchase price invoice is issued for a gross amount including the VAT valid from time to time for domestic Balancing and TP clearing members and for a net amount (0% VAT) for foreign Balancing and TP clearing members.

KELER CCP operates a guarantee system to make sure that financial liabilities are met should Clearing Member default occur, the details of which will be published in the applicable announcement.

 

KELER CCP according to the European Parliament and the Council (EU) 2019/834 regulation (EMIR REFIT) article 1. point 10 paragraph (7) publishes the design of it’s initial margin model (turnover margin) and it’s key assumptions.

Trading Platform

On the Trading Platform, KELER CCP applies a position limit, which prevents uncovered exposures from occurring, the market operates in a 'prepaid' manner. As there is no uncovered exposures, there is no need for turnover margin requirements to be determined. Clearing Members can voluntarily determine the amount of collateral posted according to their desired trading limits. Clearing Members need to set collateral in the amount of their intended trading limit and exposure. If no financial liability is generated, no turnover margin is required, so there is no minimum turnover margin for TP Clearing Members.

Balancing Clearing

In the calculation of the turnover margin on the Balancing gas market, KELER CCP takes into account the ENTRY and EXIT amounts determined by the transmission system operator for each gas day, which include both organized gas market positions and OTC positions. Furthermore, an important element of the model is the difference between the ENTRY and EXIT values, namely the imbalance position. When a system user's EXIT value is higher than the ENTRY, they may incur a payment obligation to the transmission system operator (except when using the LPFS service, but its effect is not considered in the model). The model takes into account these potential payment obligations over several days, depending on what the CCP would have had to or should have covered with collaterals in the event of a potential default.

The basis of the turnover margin is the turnover margin base, which is the maximum of three components: Expected Shortfall, Ratio Floor, and Fixed Floor. The turnover margin base is further buffered with the expert buffer and the procyclicality buffer. After rounding, the buffered turnover margin base determines the actual turnover margin requirement.

Clearing members acting as transmission system operators in the Hungarian gas market are subject to a unique margin requirement calculation. For those clearing members that qualify as transmission system operators but do not serve this role in the Hungarian gas market, the methodology detailed above applies.

The detailed methodology used to determine the turnover margin of the Balancing gas market and the value of certain parameters are published in the applicable KELER CCP announcement.

 

KELER CCP operates a guarantee system to make sure that financial obligations towards the non-defaulting party can be met in case of default by the Clearing Members. The guarantee system consists of individual and collective collateral elements as follows:

Balancing Clearing and Trading Platform

Type	Name	Objective	Eligible instruments
Individual guarantee elements	Basic Financial Collateral	The Basic Financial Collateral is to be provided upon entry into the Balancing Clearing and Trading Platform on one occasion. The objective is to cover risks arising from trading. Its amount is fixed and is published by KELER CCP in the applicable announcement.	In line with the provisions of the Conditions of acceptance of securities and currencies collateral.
	Turnover margin	The turnover margin for the Balancing Clearing is determined based on historical trading and imbalance data, aiming to determine margin requirements proportionate to risks. The related methodology and parameters are published by KELER CCP in the applicable announcement on its website. For the Trading Platform, there is no compulsory turnover margin requirement as defined by the KELER CCP.	In line with the provisions of the Conditions of acceptance of securities and currencies collateral.
	Additional Financial Collateral	It is to manage Clearing Member individual risks, to sanction the violation of certain obligations (according to the General Business Rules), to supplement the Clearing Member minimum capital or to cover any (temporary or permanent) shortage of individual or collective guarantee elements. More information on the Additional Financial Collateral.	In line with the In line with the provisions of the Conditions of acceptance of securities and currencies collateral.
Collective guarantee elements	Collective default fund contribution	The Clearing Members form a risk pool to contribute individually to the default fund of the Balancing Clearing and the Trading Platorm (TP Collective Default Fund). The objective of the collective guarantee element is to cover the basically stress risks that are uncovered by individual guarantee elements. Upon default, if the individual guarantee elements of the defaulting Clearing Member and its collective default fund contributions and the dedicated own resources of KELER CCP allocated to the  Balancing Clearing and the Trading Platfom are insufficient to cover the shortage, the collective default fund contributions of non-defaulting Clearing Members will be used also.The size of the default fund and the methodology and parameters for determining the individual contributions are published by the KELER CCP in the applicable announcement on its website.	EUR Cash collateral only

The clearing members contribute individually to the default fund of the Balancing Clearing and Trading Platform (GCDF - TP Collective Default Fund) forming a risk pool. The collective guarantee element is designed to cover the essential stress risks not covered by individual collateral. In the event of default, if the individual collaterals and the default fund contribution of the defaulting clearing member and KELER CCP’s skin in the game allocated to the Balancing Clearing and Trading Platform do not provide sufficient coverage to cover the shortfall, the default fund contribution of the non-defaulting clearing members will also be used. For more information on the order of use of the individual and collective guarantee elements, please see the ’Default Waterfall’ section.

The contributions to the default fund are determined and collected monthly, however, in case of insufficient size of the default fund, KELER CCP can order extraordinary recalculation, anytime during the month. In line with the requirements of EMIR the default fund has to cover the largest uncovered exposures or the second and third largest uncovered exposures, if the sum of the latter is larger (Max(1,2+3)) stemming from the daily stress test. KELER CCP monitors the sufficiency of the default fund. If the size of the default fund is inadequate, KELER CCP either imposes additional financial collateral or decrees an extraordinary recalculation of default fund.

The parameters of default fund determination methodology are published in the applicable announcement, the methodology is described in detail in the methodology document published. 

Related links:
Requirements of Default funds  
Methodology

At the appropriate segregation levels KELER CCP determines the individual collateral requirement to be met. Regarding the Trading Platform and Balancing Gas market all individual collateral elements can be provided in the eligible collaterals stated in the Conditions of acceptance of securities and currencies collateral. The contribution to the default fund (TP KGA), is at Clearing Member level and can be met in bank money (EUR) only.

In line with the legal requirements KELER CCP accepts only highly liquid assets as collateral, the value of which is taken into account after the deduction of the appropriate haircut. Haircuts are determined in line with the regulations, depending on the liquidity of the instrument and in the case of securities after consideration of the credit rating of the issuer, based on the calculation of the VaR. The haircut calculated based on the risk measure is to cover a price change of at least 2 days, with a confidence level of 99.9% that is increased with at least the amount of the procyclicality buffer.

Collateral assets are marked to market daily. If justified intraday mark-to-market can be ordered, the conditions of acceptance or the haircuts can also be modified.

 The list of eligible instruments, related haircut values and the concentration limits are stated in the Conditions of acceptance of securities and currencies collateral.

 

 

No financial products are traded on the Trading Platform and Balancing Gas Market, therefore it is not directly governed by EMIR, there are no direct legal guidelines on what tests should be done on this type of markets. Based on its internal methodology KELER CCP prepares regular stress tests and back tests that the default fund and the turnover margin are sufficient, it also analyses turnover annually or on a case by case basis.

In order to be able to meet the financial obligations of the clearing members in the event of a default, KELER CCP operates guarantee system. The elements of the guarantee system are the individual and collective guarantee elements of the clearing members, the skin in the game and the supplementary guarantee capital of KELER CCP. The elements of the guarantee system are used in the event of a default in the order set out in the diagram below.

 Please find here the prevailing amount of GCDF and the dedicated own resources and other financial resources of KELER CCP.