|
February 23, 2018.
Attention of Members of Indian Clearing Corporation Ltd (ICCL) is drawn to Exchange Circular No 20180221-24 dated February 21, 2018, SEBI Circular No SEBI/HO/MRD/DP/CIR/P/ 2016/0000000038 dated March 09, 2016 and ICCL Circular No 20160317-27 dated March 17, 2016 & Circular No 20160718-31 dated July 18, 2016 on the captioned subject. In this context, Members are hereby informed the said contracts shall be introduced w.e.f February 27, 2018.
Accordingly, Members are hereby requested to note the following norms pertaining to Clearing & Settlement process, Margin Requirements and details of End of Day files with provision of additional reports.
- Settlement Process – Part A
- Margins – Part B
- Clearing & Settlement EOD Files- Part C
Members may kindly note that the enhancements in the present provisional EOD files shall be made available in the live environment with effect from end-of-day (EOD) Tuesday, February 27, 2018. There shall be no change in the existing file structure.
All other norms/guidelines pertaining to currency & interest rate derivatives shall remain unchanged. For more details, members may refer to the aforesaid circulars.
For any clarifications, Members may contact their respective Relationship Managers or any of the following officials:
|
Sr. No
|
Query Type
|
Coordinates
|
|
1
|
Collaterals & Settlement/EOD Formats
|
022 22728185/8467/8843
|
|
2
|
Margins
|
022 22728759
|
For and on behalf of the Indian Clearing Corporation Limited
Piyush Chourasia Hitesh Shah
Chief Risk Officer & Head – Strategy Asst. General Manager
Part A: Settlement Process
Ø Exchange Traded Cross Currency Derivatives (Futures and Options) Contracts on EUR-USD, GBP-USD and USD-JPY currency pairs
- The contracts will be settled in cash in Indian Rupee (INR).
- The Daily mark-to-market and premium settlement of cross currency derivatives contracts will be on T +1 day basis as per the timelines specified by ICCL.
- The Cross currency derivatives contracts would expire on the last working day (excluding Saturdays) of the contract month. The Final Settlement will be on T+2 day basis as per the timelines specified by ICCL.
- The pay-in and pay-out of daily mark to market settlement, premium settlement & Final mark-to-market and exercise settlement would be effected in accordance with the settlement schedule issued by ICCL periodically.
- For arriving at the daily settlement value for cross currency contracts in INR for EUR-USD and GBP-USD contracts, the latest available Reserve Bank of India (RBI) reference rate for USD-INR shall be used. For USD-JPY contracts, the settlement value in INR shall be arrived at using the latest available exchange rate published by RBI for JPY-INR.
- The final settlement price of the cross-currency derivatives contracts shall be computed using the RBI reference rate for USD-INR and the corresponding exchange rate published by RBI for EUR-INR, GBP-INR and JPY-INR, as applicable, on the last trading day of the contract.
- For arriving at the final settlement value in INR for EUR-USD and GBP-USD contracts, the RBI reference rate for USD-INR on the last trading day of the contract shall be used. For USD-JPY contracts, the final settlement value in INR shall be arrived at using the exchange rate published by RBI for JPY-INR on the last trading day of the contract.
- On expiry date, all open long in-the-money contracts, on a particular strike of a series, at the close of trading hours would be automatically exercised at the final settlement price and assigned on a random basis to the open short positions of the same strike and series.
- Online Give-up/Take-up confirmation of trades for cross currency derivatives contracts will be till 7:45 pm in RTRMS System. Give-up/Take-up confirmation of trades for Currency Derivatives & IRF contracts shall be till 5:30 pm as at present.
Ø Exchange Traded Options on EUR-INR, GBP-INR and JPY-INR Currency Pairs
- The Settlement of currency option contracts will be settled in cash in Indian Rupee (INR).
- The Daily premium settlement of currency options contracts will be on T +1 day basis and Final exercise settlement of options contracts will be on T+2 day basis as per the timelines specified by ICCL.
- The pay-in and pay-out of premium settlement and final exercise settlement would be effected in accordance with the settlement schedule issued by ICCL periodically.
- The final settlement price would be the exchange rate published by RBI on the last trading day of the contracts
- On expiry date, all open long in-the-money contracts, on a particular strike of a series, at the close of trading hours would be automatically exercised at the final settlement price and assigned on a random basis to the open short positions of the same strike and series.
Part B: Margins
Ø ICCL Margin Framework for Futures & Options in Cross Currency Contracts (EUR-USD, GBP-USD and USD-JPY currency pairs) and Options on EURINR, GBPINR & JPYINR currency pairs
The margins levied to members shall be levied and collected in INR. For this purpose, the Reserve Bank of India (“RBI”) reference rate of previous day for USDINR and the corresponding exchange rate published by RBI for JPY-INR, as applicable, shall be used till 02:00 p.m. The latest available RBI reference rate for USDINR and the corresponding exchange rate published by RBI for JPYINR, as applicable, shall be used post 02:00 p.m. The margin parameters for the option contracts on currency pairs EURINR, GBPINR and JPYINR and the futures and option contracts on the cross-currency pairs EURUSD, GBPUSD and USDJPY are as prescribed below.
1. Initial Margin
a. Computation of Initial Margin
ICCL shall adopt the Standard Portfolio Analysis of Risk (“SPAN”) methodology for the purpose of real time risk management.
The Initial Margin requirement would be based on a worst scenario loss of a portfolio of an individual client comprising his positions in options and futures contracts on the same underlying across different maturities and across various scenarios of price and volatility changes. The Initial Margin requirements shall be set to provide coverage of at least a 99% single-tailed confidence interval of the estimated distribution of future exposure over a one day time horizon.
The client-wise margins would be grossed across various clients at the Trading / Clearing Member level. The proprietary positions of the Trading / Clearing Member would be treated as that of a client (net basis).
The Black-Scholes option pricing model would be used for the purpose of calculation of option values.
b. Initial Margin Requirement
The initial margin shall be deducted from the liquid assets of the clearing member on an online, real time basis.
|
Sr. No.
|
Particulars
|
Minimum Initial Margin
|
|
Futures
|
|
1
|
EURUSD
|
2.00%
|
|
2
|
GBPUSD
|
2.00%
|
|
3
|
USDJPY
|
2.00%
|
|
Options
|
|
4
|
EURUSD
|
2.00%
|
|
5
|
GBPUSD
|
2.00%
|
|
6
|
USDJPY
|
2.00%
|
The Initial Margin for EURINR, GBPINR and JPYINR options would be the same as specified for FCYINR currency futures.
c. Price Scan Range
The Price Scan Range (“PSR”) is the probable price change over a one-day period. PSR would be specified by ICCL from time to time. The PSR is referred to in standard deviation/ sigma terms. The standard deviation (volatility estimate) shall be computed using the Exponentially Weighted Moving Average method (“EWMA”).
The estimate at the end of time period t (σt) shall be estimated using the volatility estimate at the end of the previous time period. i.e. as at the end of t-1 time period (σt-1), and the return (rt) observed in the futures market during the time period t.
The volatility estimated at the end of the day’s trading would be used in calculating the initial margin calls at the end of the same day.
The formula shall be as under:
Where:
Ø λ is a parameter which determines how rapidly volatility estimates changes. The value of λ is currently fixed at 0.94.
Ø σ (sigma) means the standard deviation of daily returns in the futures market.
Ø The "return" is defined as the logarithmic return: rt = ln (St/St-1) where St is the price at time t.
d. Volatility Scan Range
The Volatility Scan Range (“VSR”) is the amount by which the implied volatility is changed in each risk array scenario. The VSR is referred to in percentage terms.
The price scan range and volatility scan range ("VSR") for generating the scenarios would be as below or such other percentage as may be specified by ICCL from time to time.
|
Sr. No.
|
Particulars
|
PSR
|
VSR
|
|
Futures
|
|
1
|
EURUSD
|
3.5 sigma
|
NA
|
|
2
|
GBPUSD
|
3.5 sigma
|
NA
|
|
3
|
USDJPY
|
3.5 sigma
|
NA
|
|
Options
|
|
1
|
EURINR
|
3.5 sigma
|
3%
|
|
2
|
GBPINR
|
3.5 sigma
|
3%
|
|
3
|
JPYINR
|
3.5 sigma
|
3%
|
|
4
|
EURUSD
|
3.5 sigma
|
3%
|
|
5
|
GBPUSD
|
3.5 sigma
|
3%
|
|
6
|
USDJPY
|
3.5 sigma
|
3%
|
2. Extreme Loss margin
The extreme loss margin shall be deducted from the liquid assets of the clearing member on an online, real time basis.
|
Sr. No.
|
Particulars
|
Minimum Initial Margin
|
|
Futures
|
|
1
|
EURUSD
|
1% of the mark to market value of the contract for all gross open positions
|
|
2
|
GBPUSD
|
1% of the mark to market value of the contract for all gross open positions
|
|
3
|
USDJPY
|
1% of the mark to market value of the contract for all gross open positions
|
|
Options
|
|
1
|
EURINR
|
1.5% of the Notional Value of the open short option position
|
|
2
|
GBPINR
|
1.5% of the Notional Value of the open short option position
|
|
3
|
JPYINR
|
1.5% of the Notional Value of the open short option position
|
|
4
|
EURUSD
|
1% of the Notional Value of the open short option position
|
|
5
|
GBPUSD
|
1% of the Notional Value of the open short option position
|
|
6
|
USDJPY
|
1% of the Notional Value of the open short option position
|
Notional Value would be calculated on the basis of the latest exchange rate published by RBI for respective exchange rate.
3. Calendar spread margin
A currency futures position at one maturity which is hedged by an offsetting position at a different maturity would be treated as a calendar spread.
A long currency option position at one maturity and a short option position at a different maturity in the same series, both having the same strike price would be treated as a calendar spread. The margin would be calculated on the basis of delta of the portfolio in each month. A portfolio consisting of a near month option with a delta of 100 and a far month option with a delta of –100 would bear a spread charge equal to the spread charge for a portfolio which is long 100 near month currency futures and short 100 far month currency futures. Portfolio would mean portfolio consisting of futures and /or options contract on a particular underlying. Option positions of different expiry, irrespective of their strike prices, shall also attract calendar spread margin.
The benefit for a calendar spread would continue till expiry of the near month contract. The calendar-spread margin shall be charged in addition to the worst-scenario loss of the portfolio.
|
Sr. No.
|
Particulars
|
Calendar Spread Margin
|
|
1 month
|
2 months
|
3 months
|
4 months and above
|
|
1
|
EURINR
|
INR 700
|
INR 1,000
|
INR 1,500 (3 months and above)
|
|
2
|
GBPINR
|
INR 1,500
|
INR 1,800
|
INR 2,000 (3 months and above)
|
|
3
|
JPYINR
|
INR 600
|
INR 1,000
|
INR 1,500 (3 months and above)
|
|
4
|
EURUSD
|
INR 1,500
|
INR 1,800
|
INR 2,000
|
INR 2,100
|
|
5
|
GBPUSD
|
INR 1,500
|
INR 1,800
|
INR 2,000
|
INR 2,100
|
|
6
|
USDJPY
|
INR 1,500
|
INR 1,800
|
INR 2,000
|
INR 2,100
|
For a calendar spread position, the extreme loss margin shall be charged on one third of the mark to market value of the far month contract.
4. Net Option Value
The Net Option Value (“NOV”) is the current market value of the option times the number of options (positive for long options and negative for short options) in the portfolio. The Net Option Value would be added to the Liquid Net Worth of the clearing member. Thus, mark to market gains and losses would not be settled in cash for options positions.
5. Settlement of Premium
Premium would be settled in INR and would be paid in by the buyer in cash and paid out to the seller in cash on T+1 day. Until the buyer pays in the premium, the premium due shall be deducted from the available liquid assets on a real time basis. For arriving at the settlement value in INR for EURUSD and GBPUSD contracts, the latest available RBI reference rate for USDINR shall be used. For USDJPY contracts, the settlement value in INR shall be arrived at using the latest available exchange rate published by RBI for JPYINR.
6. Assignment Margin
Assignment Margin shall be levied on assigned positions of the clearing members towards exercise settlement obligations for option contracts. For option positions exercised, the seller of the options shall be levied assignment margins which shall be 100% of the net exercise settlement value payable by a clearing member towards exercise settlement. Assignment margin shall be levied till the completion of pay-in towards the exercise settlement. Assignment margins shall be computed as net of assignment settlement and futures final settlement.
7. Imposition of Additional Margins
As a risk containment measure, ICCL may require clearing members to make payment of additional margins as may be decided from time to time. This shall be in addition to the initial margin and extreme loss margin, which are or may have been imposed from time to time.
8. Updation of risk parameters
The ICCL SPAN risk management parameters shall be updated at:
Ø Beginning-of-Day
Ø 11:00 a.m.
Ø 12:30 p.m.
Ø 02:00 p.m.
Ø 03:30 p.m.
Ø 05:00 p.m.
Ø 06:30 p.m.
Ø End-of-Day
9. Enforcement and Collection of Margins
Aforesaid margins are computed at a client level portfolio and grossed across all clients (including the proprietary positions of member) at the member level. Margins are collected/adjusted upfront from the liquid assets of the Clearing Members on an on-line real time basis.
Members are required to collect initial margins, extreme loss margins, calendar spread margins and mark to market settlements and report details of such margins collected from their client/constituents to ICCL.
Part C: Clearing & Settlement EOD Files
Members are hereby informed to note the below details of clearing & settlement EOD Files.
|
Files for Currency pairs excluding IRF Contracts
|
|
Existing File Nomenclature
|
Revised File Nomenclature
|
|
File Type
|
Description
|
Existing File Name
|
Revised File Name
|
|
Currency Trade File
|
CDX trade file for TM/CM
|
BFX_PCDX_TRCM_<memcode>_yyyymmdd.csv BFX_PCDX_TRTM_<memcode>_yyyymmdd.csv
|
BFX_CUR_TRCM_<memcode>_yyyymmdd.csv BFX_CUR_TRTM_<memcode>_yyyymmdd.csv
|
|
Currency Position File
|
CDX position file for TM/CM
|
BFX_PCDX_POCM_<memcode>_yyyymmdd.csv BFX_PCDX_POTM_<memcode>_yyyymmdd.csv
|
BFX_CUR_POCM_<memcode>_yyyymmdd.csv BFX_CUR_POTM_<memcode>_yyyymmdd.csv
|
|
Provisional Margin File
|
Provisional Margin file for TM/CM
|
BFX_PCDX_MGCM_<memcode>_ddmmyyyy.csv
BFX_PCDX_MGTM_<memcode>_ddmmyyyy.csv
|
BFX_CUR_MGCM_<memcode>_ddmmyyyy.csv
BFX_CUR_MGTM_<memcode>_ddmmyyyy.csv
|
|
Provisional Margin Statement File
|
Provisional Margin statement for TM/CM
|
BFX_PCDX_MG01_<memcode>_ddmmyyyy.csv
BFX_PCDX_MG02_<memcode>_ddmmyyyy.csv
|
BFX_CUR_MG01_<memcode>_ddmmyyyy.csv
BFX_CUR_MG02_<memcode>_ddmmyyyy.csv
|
|
Files for Interest Rate Derivatives and Consolidated details of Currency & IRF Contracts
|
|
IRF Trade File
|
IRF trade file for TM/CM
|
BFX_PIRF_TRCM_<memcode>_yyyymmdd.csv BFX_PIRF_TRTM_<memcode>_yyyymmdd.csv
|
BFX_IRF_TRCM_<memcode>_yyyymmdd.csv BFX_IRF_TRTM_<memcode>_yyyymmdd.csv
|
|
IRF Position File
|
IRF position file for TM/CM
|
BFX_PIRF_POCM_<memcode>_yyyymmdd.csv BFX_PIRF_POTM_<memcode>_yyyymmdd.csv
|
BFX_IRF_POCM_<memcode>_yyyymmdd.csv BFX_IRF_POTM_<memcode>_yyyymmdd.csv
|
|
Combined Trade file
|
Combined provisional trade file of Currency & IRF
|
P_BFX_TRCM_<memcode>_yyyymmdd.csv P_BFX_TRTM_<memcode>_yyyymmdd.csv
|
BFX_CDX_TRCM_<memcode>_yyyymmdd.csv BFX_CDX_TRTM_<memcode>_yyyymmdd.csv
|
|
Combined Position file
|
Combined provisional Position file of Currency & IRF
|
P_BFX_POCM_<memcode>_yyyymmdd.csv P_BFX_POTM_<memcode>_yyyymmdd.csv
|
BFX_CDX_POCM_<memcode>_yyyymmdd.csv BFX_CDX_POTM_<memcode>_yyyymmdd.csv
|
|
Margin File
|
Provisional Combined Currency & IRF Margin file for TM/CM
|
P_BFX_MGCM_<memcode>_ddmmyyyy.csv
P_BFX_MGTM_<memcode>_ddmmyyyy.csv
|
BFX_CDX_MGCM_<memcode>_ddmmyyyy.csv
BFX_CDX_MGTM_<memcode>_ddmmyyyy.csv
|
|
Margin Statement File
|
Provisional Combined Currency & IRF Margin statement for TM/CM
|
P_BFX_MG01_<memcode>_ddmmyyyy.csv
P_BFX_MG02_<memcode>_ddmmyyyy.csv
|
BFX_CDX_MG01_<memcode>_ddmmyyyy.csv
BFX_CDX_MG02_<memcode>_ddmmyyyy.csv
|
|
Final Consolidated Files (Currency/IRF/Cross Currency)
|
|
Trade File
|
CDX/IRF/CROSS
|
BFX_TRCM_<memcode>_yyyymmdd.csv BFX_TRTM_<memcode>_yyyymmdd.csv
|
No Change
|
|
Position File
|
CDX/IRF/CROSS
|
BFX_POCM_<memcode>_yyyymmdd.csv BFX_POTM_<memcode>_yyyymmdd.csv
|
Price Field for Cross Currency derivatives contracts shall be in INR
|
|
Margin File
|
CDX/IRF/CROSS
|
BFX_MGCM_<memcode>_ddmmyyyy.csv
BFX_MGTM_<memcode>_ddmmyyyy.csv
|
No Change
|
|
Final consolidated Margin Statement for CM/TM
|
CDX/IRF/CROSS
|
BFX_MG01_<memcode>_ddmmyyyy.csv
BFX_MG02_<memcode>_ddmmyyyy.CSV
|
No Change
|
|
Bank File
|
Bank Report
|
BFX_BR01_<memcode>_ddmmmyy .CSV
|
No Change
|
|
Files for Cross Currency Derivatives Contracts
|
|
Trade File
|
Cross currency trade file
|
BFX_CCDX_TRCM_<memcode>_yyyymmdd.csv BFX_CCDX_TRTM_<memcode>_yyyymmdd.csv
|
Additional File
|
|
Position File
|
Cross currency trade file
|
BFX_CCDX_POCM_<memcode>_yyyymmdd.csv BFX_CCDX_POTM_<memcode>_yyyymmdd.csv
|
Additional File
|
|