Rules of monitoring position concentration limits:
The position concentration limit
determines the maximum number of positions which may be opened in a class of derivatives. The limit protects against excessive concentration of positions in the accounts of a single investor, which could be dangerous for the market if KDPW_CCP needs to close out such positions.
To mitigate the risk to which KDPW_CCP and market participants are exposed on the OTC market (in non-organised trading), transaction, exposure, and position concentration limits are monitored on an on-going basis.
If a limit of concentration of the number of open positions is breached, KDPW_CCP calls the clearing member to provide KDPW_CCP with detailed information on the reasons for the limit breach, the method of hedging the exposure, and the plan of restoring compliance with the limit.
As a result of analysing of the utilisation of the concentration limit and the information provided by the member, KDPW_CCP is entitled to assess the risk related to the limit breach and to take the following actions:
- refuse acceptance of further transactions for which the member is designated as the clearing member (§ 48 subpara. 7 of the Rules of transaction clearing (non-organised trading));
- request the clearing member to reduce the exposure to the instrument (§ 87 subpara. 8 of the Rules of transaction clearing (non-organised trading));
- pass a resolution temporarily raising its obligations in respect of initial margins calculated on the basis of an indicator set in the resolution;
- decide not to take any actions with respect to the participant in view of low estimated significance of the concentration risk.