Spot and derivative 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 margin model and it’s key assumptions regarding CEEGEX spot market and HUDEX/Gas Futures markets.

CEEGEX spot market

There is no algorithm based turnover margin requirement calculation by KELER CCP for CEEGEX spot market. Clearing members can voluntarily define the amount of turnover margin necessary for their trading limits. Clearing members can define the necessary amount of collaterals (EUR) as turnover margin based on their planned exposures and trading limits.  If clearing members do not generate any financial obligations, the placement of turnover margin is not necessary, meaning the required minimum amount of turnover margin is 0 EUR for CEEGEX spot clearing members. Determination of the CEEGEX turnover margin is published in announcement.

HUDEX derivative market

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 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.

When the portfolio level initial margin requirement is calculated, the margin requirement calculated based on the net open positions and the related initial margin parameter is decreased with the spread discounts determined by KELER CCP.  Spread discounts have two types on derivative gas market: 1. Spread discount between products, which is a percentage discount from the sum of initial margin requirements of different product’s opposing positions 2. Spread discounts between maturities which is a percentage discount from the sum of initial margin requirements because of having opposite positons in different maturities in the same product. The determination of spread discounts is based on the Pearson correlation coefficient of daily yields in both cases.

The initial margin requirement to be met is calculated at portfolio level with the use of the SPAN® software developed in Chicago. The initial margin is determined in the gas product’s trading currency.

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

Moreover, for physically delivered gas futures delivery margin requirement is also calculated. The margin requirement of products in the delivery cycle is published in the applicable announcement.

Related links:

Margin requirements of CEEGEX spot market

Margin parameters