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Modifications to the margining model and monitoring of transaction limits

Based on recommendations issued by third-party institutions, as confirmed by KDPW_CCP’s in-house analyses, we consider that the existing margining system based on SPAN margins and marking to market does not address the requirements of management of wrong-way risk (WWR) and liquidity risk (LCR).

KDPW_CCP have aligned its own clearing system and is planning to implement the solution in the production system immediately after obtaining the authorisations required for the modifications in accordance with Article 49 of the amended EMIR in Q2 2021.

Modifications to the margining model following the introduction of add-on margins
Presentation from the meeting held to discuss modifications to the KDPW_CCP margining model
Update on the project status and roll-out date

Amendments to the appendices to the Detailed Rules of Transaction Clearing (organised trading) have been prepared containing the margining algorithms including new components: liquidity and concentration risk add-ons and wrong way risk add-ons.:
Appendices 1, 2, 3
Appendix 4
Appendix 5

Introduction of a new message colr.adn.001.01
Concerning the introduction of new additional components of margin requirements: liquidity and concentration risk add-ons and wrong way risk add-ons, the new XML message colr.adn.001.01 will be introduced. The message provides KDPW_CCP participants with complete information concerning margin parameters to be used if required in participants’ solutions automating calculations in their internal systems. The message colr.adn.001.01 will be distributed to participants on a daily basis as a part of the end-of-day clearing process.

 
Message name Message description Pdf Xsd Example
colr.adn.001.01 Parameters set by KDPW_CCP to calculate add-ons    

Modifications to the separate monitoring of transaction limits and a margin pool for the ATS implemented on 17-18 April 2021

 
Message name Message description Pdf Xsd Example
colr.mrg.001.03 margin payments; core message for organised trading participants;        
colr.mrl.001.03 message used to set, query about the status of, and cancel a transaction limit on the participant’s account; message sent by participants to kdpw_stream;      
colr.mrs.001.03 message used to present the degree of utilisation of transaction limits; message sent to clearing members;       

The message colr.mrg.001.03 presents margins at market level (regulated market or ATS), clearing member level, individual account (NKK) level, and clearing account level, broken down by cash market and derivatives market and broken down by risk (SPAN® margin, marking to market, WWR add-on, LCR add-on).
Following suggestions and a review, the message colr.mrg.001.03 has been modified by changing the names of three fields.

Previous version:


Current version:


The message colr.mrl.001.03 enables, as it did before, the management of margin requirement limits at clearing member level and at member account level (querying about the degree of utilisation of a member’s limit and a member account limit, setting the limits). The message can be used to query about margin requirements for all accounts of a clearing member which need not be enumerated.

The message colr.mrs.001.03 presents the current utilisation of a clearing member’s transaction limit and the margin requirement by market (regulated market and ATS), clearing member, and account. The margin requirement per account will present all margin components including WWR and LCR add-ons.

The LCMrgn and WWRMrgn fields in messages colr.mrg.001.03 and colr.mrs.001.03 will be completed when the modifications to the margin calculation model will be implemented, which is planned as part of the autumn implementation window.

The implementation of the new schemas of kdpw_stream messages discontinued the following colr.mrg messages:
  • colr.mrg.001.02 - margin payments; core message for organised trading participants;
  • colr.mrg.004.02 - margins per clearing account; aggregate account margin break-down;
  • colr.mrg.005.02 - margin payments (message for lending);
  • colr.mrg.006.02 - margins per clearing account (message for lending).

Alignment with the new communications of margins will enable participants to efficiently respond to changes of KDPW_CCP margin requirements, especially with separate monitoring of ATS transaction limits and margins.

Modifications include separate ATS trade monitoring and margins introduce new margin type designations as follows:
- MATS – ATS trade initial margin,
- MAGB – ATS trade initial deposit.

KDPW_CCP participants who clear trade in the alternative trading system will be required to post MAGB margins on the first business day after the implementation of the modifications. The margin posting methods and structure are the same as for MARI and MARS. Securities may be posted as margins in accounts dedicated to the new types of margins: account ID 4007 for MAGB and account ID 4008 for MATS (the institution code 0900 remains unchanged).

The table below presents the details of margins in monitoring while the funds remain unchanged.



Letter regarding the implementation of separate monitoring of clearing members’ transaction limits dedicated to the ATS