Initial Margin

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 and it’s key assumptions.

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 for at least two days, with a confidence level of at least 99%. KELER CCP determines the initial margin based on the calculation of the delta-normal VaR (Value at Risk), in line with the requirements stated in the applicable regulation. The parameters applied are as follows: minimum holding period of 2 days (EMIR 153/2013/EU RTS article 26.), confidence level of 99%, and lookback period of at least 1 year (EMIR 153/2013/EU RTS article 25.) which contains stress event, if not, the lookback period should be increased until a stress event is included. Additionally, to determine the VaR value, the change in the product’s log yield volatility computed for the lookback period is used. The calculated risk measure is supplemented with the buffer (25%) against procyclicality in line with EMIR 153/2013/EU RTS article 28. Moreover, liquidity and expert buffer can be applied based on sensitivity test. In case of new products, when historic volatility is not available, the volatility of a proxy product chosen based on expert approach is used to determine the initial margin.

When the portfolio level initial margin requirement is determined, 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.  Spread discounts have one type on multinet market: 1. Spread discounts between settlement days, which is a percentage discount from the sum of initial margin requirements of different trading days opposing positions. Its value is published in announcement.

The initial margin requirement to be met is calculated at portfolio level with the use of the SPAN® software developed in Chicago.

KELER CCP’s initial margin model parameters are supervised regularly (daily, yearly) in line with legal requirements. The methodology of initial margin determination, the use of the risk measure and the method of spread discount determination are detailed in the methodology document published.

Related links:

Margin parameters