Initial margin

On the CEEGEX markets we can differentiate the spot and the futures gas market

On the spot gas market the margin requirement is determined based on the turnover and the delivery margin requirement. On the CEEGEX spot gas market position limit is used, accordingly, the matched transaction can be accepted up to the value of collateral assets deposited in favor of KELER CCP. The position limit is the difference of the value of the blocked collateral assets and the collateral requirement of the open futures transactions in physical delivery. Thus the turnover margin limits trading, as a result the risk arising from default on the purchase price of gas market products can be prevented as purchase price is covered with collateral instrument. In addition to the amount of the turnover margin the assets deposited in favor of KELER CCP are taken into account when the market position limit is calculated. The margin requirement calculated based on transactions in physical delivery are calculated for futures transactions in delivery, as the purchase price of products in delivery must be provided each day. The delivery margin requirement is meant to cover the risks arising upon default on purchase price during the delivery period. The spot market margin requirement and the methodology of position limit calculation are detailed in the applicable announcement published.

Related link: 
CEEGEX Spot market Announcement

The amount of initial margin is determined by product and is stated in the applicable announcement that KELER CCP publishes on its website. The objective of initial margin is to cover the potential change in the product price of at least two days, with a confidence level of at least 99%. KELER CCP determines the initial margin after the calculation of the VaR (Value at Risk). The applied parameters (minimum holding period of 2 days, level of confidence of 99% and look back period of at least 1 year). The thus calculated risk measure is supplemented with at least the buffer against procyclicality in line with the legal requirements.

The initial margin requirement to be met is calculated at portfolio level with the use of the SPAN® software developed in Chicago. When the portfolio level initial margin requirement is calculated, the margin requirement calculated based on the net open positions at the segregation level concerned and the related initial margin parameter is decreased with the spread discounts determined by KELER CCP (for products and/or settlement days). The methodology of initial margin determination, the use of risk measure and the method of spread discount determination are detailed in the methodology document published.

Related link: 
HUDEX/Gas Market Announcement