Default Funds. Collateral for Stress. Concentration Risk Mitigation Collateral

On the securities, fx and derivatives markets of the Moscow Exchange Group NCC uses individual and collective clearing collateral and also "other" collateral type to secure fulfillment of obligations accepted for clearing:

Individual clearing collateral and "other" collateral type Collective clearing collateral
Individual clearing collateral
"Other" collateral type
Collateral for Stress
Concentration Risk Mitigation Collateral
Default Funds

NCC accepts the following as contributions to default funds, Collateral for Stress and Concentration Risk Mitigation Collateral:
cash funds: Russian rubles, US dollars, euro;
securities (OFZ).

Default funds

Default fund is collective clearing collateral, which is formed by the Clearing House through contributions of Clearing Members and other entities, defined in the Clearing Rules, with the aim to secure fulfillment of obligations under Partially Secured Trades on the relevant on-exchange market.

Account details for making contributions to Default Funds

Contribution to Default Funds corresponds to the sum of required contribution size regarding each market in ruble equivalent. In order to deposit cash funds Default Funds Settlement account is indicated in the purpose of payment. In order to post securities to the Default Fund depo sub-account designed for recording Default Funds contributions is used.

Categories of Clearing Members

Market Contribution size, rub. Categories of Clearing Members
Securities market and deposits market* 0, without admission to partially secured trading category "C"
10 000 000 on the Securities market categories "О" and "B"
1 000 000 on the Deposits market category "B"
FX market and precious metals market* 0, without admission to partially secured trading Category "C"
10 000 000 Categories "O" and "B"
Derivatives market 10 000 000 Categories "O" and "B"
Standardised Derivatives Market 10 000 000 Category "B"
Commodities market* 0, without admission to partially secured trading Category "C"
1 000 000 Category "B"

* On the defined markets contribution to the Default Fund is provided by Clearing Members that execute partially secured trades.

The following accounts are used for accepting Default Funds contributions:
NCC clearing banking accounts, opened with NSD and Bank of Russia in the relevant currency;
NCC clearing depo account, opened with NSD, under which depo sub-account for recording Default Fund contributions in securities is opened to the Clearing Member. Clearing Member must be the Client of NSD.

In case if the Clearing Member posts to Default Funds foreign currency and/or securities, NCC re-calculates price of these assets every Settlement Day before the trading starts.

NCC issues Margin Call for Default Funds in case if the limit (500 thousand rubles) is exceeded. This information is reflected in the Report on Default Funds EQM92, which is provided on a daily basis.

According to the Time Specifications, Margin Call shall be satisfied till 17:30 on the day when the Margin Call is issued. If Margin Call is not satisfied within the defined period of time, NCC will assign to such Clearing Member category "C" on the relevant markets, without an opportunity to execute partially secured trades, meanwhile:
if the Clearing Member has the category "O" or "B" on the securities market and deposits market then category "C" will be assigned to such Clearing Member on this market;
if the Clearing Member is admitted to the clearing service on the Derivatives market then admission of such Clearing Member to the clearing service on this market will be suspended;
if the Clearing Member is admitted ti the clearing service on the Standardised Derivatives market then admission of such Clearing Member to the clearing service on this market will be suspended;
if the Clearing Member has the category "B" or "O" on the fx market and precious metals market then the category "C" is assigned to such Clearing Member on this market;
if the Clearing Member has the category "B" on the commodities market then the category "C" will be assigned to such Clearing Member on this market.

1. In cash funds:

1.1. Get Settlement Account for recording Default Fund contribution (is forwarded to each Clearing Member via EDI). In order to get such account please address your personal manager.

1.2. Transfer cash funds in Russian rubles and/or in foreign currency, indicating in the purpose of payment Settlement Account for recording Default Fund contributions according to the account details for the relevant currency.

1.3. Submit request to transfer cash funds via the Clearing System to the Settlement Account for recording Default Fund contributions.

2. In securities (optionally):

For Clearing Members that are not admitted to the securities market

2.1. Become NSD client. Open proprietary trading section of the trading securities account.

2.2. Gain admission to the clearing service on the securities market and deposits market.

2.3. Gain technical access to the trading clearing system of the securities market. This issue shall be addressed to the Technical Support Team via e-mail help@moex.com.

2.4. Take actions according to the paragraphs 2.5.-2.7.

For Clearing Members which are planning to post securities and are admitted to the securities market

2.5. Sign with NSD Supplemental Agreement to the Securities Account Agreement – consent to transfer income on securities, recorded under the securities sub-account of the Clearing Member, opened under the NCC clearing securities account, to the NCC clearing bank account, opened with NSD, designed for recording collective clearing collateral. This issue shall be addressed to your personal manager in NSD.

2.6. After receiving from NSD information on Supplemental Agreement signed with the Clearing Member, NCC opens securities sub-account for recording securities of the Clearing Member under theclearing securities account and registers Trade Account, into the structure of which Settlement Account for posting Default Fund contribution and opened secueiries sub-account are included.

2.7. Transfer required amount of securities from the proprietary Trade Account to the Trade Account for posting Default Funds contributions.

Collateral for stress

Collateral for stress on the FX, securities and derivatives markets constitutes individual clearing collateral, which is calculated based on risk exposure under partially secured trades, executed by Clearing Members with the CCP on the relevant market.

Claim to post Collateral for Stress arises for Clearing Members, whose daily average position on the market is more than positions of other members on this market.
Methodology for Calculation of Stress Collateral of NBCI NCC (JSC)

Collateral for Stress is calculated since 28.06.2016. According to the Methodology for Calculation of Stress Collateral of NBCI NCC (JSC) abovementioned collateral is calculated every Tuesday and the Clearing Member has five Settlement Days to fulfil obligations to post Collateral for Stress. Clearing Members that have obligation to post Collateral for Stress are notified by Notification on the minimum size of Collateral for Stress (CCX94).

NCC assigns Settlement Account for posting Collateral for Stress and forwards notification via EDI only to those Clearing Members that have obligations to post Collateral for Stress.

Settlement Account for posting Collateral for Stress, received via EDI, is defined by the Clearing Member in the purpose of payment when posting Collateral for Stress.
NCC uses the following to accept Collateral for Stress:
clearing bank accounts of NCC, opened with NSD, Bank of Russia and NCC’s correspondent accounts with foreign banks. Settlement Account for posting Collateral for Stress is defined in the purpose of payment;
clearing depo account of NCC opened with NSD, under which depo sub-account for recording Collateral for Stress is opened for the Clearing Member.

In case if the Clearing Member has already forwarded to NSD Supplementary agreement to the depo accounts agreements and already has depo sub-account for posting default fund contributions in securities then depo sub-account for posting Collateral for Stress will be opened by NCC automatically.

Settlement Account, depo sub-account and Trade Account for posting Collateral for Stress are indicated in the Collateral for Stress Report (EQM93). Report is provided only to those Clearing Members that have obligation to post Collateral for Stressс.

In case if the Clearing Member posts Collateral for Stress in foreign currency and/or securities, every Settlement Day before the trading starts NCC reevaluates assets and in case of exceeding limit for triggering Margin Call (500 thousand rub.) – Margin Call regarding Collateral for Stress is triggered. Such information is disclosed in the EQM93 report. According to the Time Specifications Margin Call shall be met till 17:30 on the day when the Margin Call is triggered.

Starting from 18.07.2016 NCC accrues interest for using cash funds in Russian rubles and US dollars, recorded as Collateral for Stress, according to the Clearing Rules of the CCP NCC.

Interest is paid to the Clearing Member on the first Settlement Day of the month, following the reporting one. Sum of the interest is enlarged for the sum, recorded as Collateral for Stress. Information on daily interest accrual and on monthly payment of such interest is disclosed in the Cash flow statement (CCX99).

Concentration Risk Mitigation Collateral

Concentration Risk Mitigation Collateral is additional individual clearing collateral for Clearing Members on the Securities Market, Deposit Market and Credit Market.

Concentration risks on emitters is when total volume of emitter’s securities under Trade Accounts exceeds set Limits for concentration on emitters (per assets group: ordinary shares, preferred shares, bonds).

Everyday NCC sets Limits for concentration on emitters per asset group and controls that Clearing Member of the category “B”, “C” and “O” on the securities market under Trade Accounts of which securities of such emitter are recorded as Collateral, meets requirements for concentration risk mitigation collateral.

Securities under Default Funds Trade Accounts, Trade Accounts for recording Collateral for Stress and Trade Accounts for recording Concentration Risk Mitigation Collateral are not subject to the abovementioned control.

For each Clearing Member of the securities market NCC without application of the Clearing Member opens proprietary Settlement Account for recording Concentration Risk Mitigation Collateral and depo sub-account for recording Concentration Risk Mitigation Collateral and registers Trade Account for recording Concentration Risk Mitigation Collateral. Depo sub-account is opened for the Clearing Member in case if NSD’s Terms and Conditions of Depository Operations (Clearing Member has submitted Supplementary agreement to the Depo accounts agreements). If the Clearing Member already has depo sub-account for posting default funds contributions / depo sub-account for recording Collateral for Stress, then depo sub-account for recording Concentration Risk Mitigation Collateral is opened automatically.

NCC calculates Concentration Risk Single Limit under the Settlement Account for recording Concentration Risk Mitigation Collateral during the day. In case if by the time of mark-to-market clearing session Single Limit under such Settlement Account is negative, Margin Call in respect of concentration risks on emitters will be triggered, it will be disclosed in the Report on Margin Calls (EQM14). Margin Call shall be met till 17:30 on the day when it is triggered.

Information on opened Settlement Account and Trade Account for recording Concentration Risk Mitigation Collateral and on posted collateral is disclosed in the Report on Concentration Risk Mitigation Collateral (EQM94).

In order to accept cash funds as Concentration Risk Mitigation Collateral NCC uses clearing banking accounts of NCC opened with NSD and NCC’s correspondent accounts opened with foreign banks. Settlement Account for recording Concentration Risk Mitigation Collateral is defined in the purpose of payment. Cash funds can also be credited via the Clearing System.

Securities as Default Funds contributions / Collateral for Stress / Concentration Risk Mitigation Collateral can be possible by the following ways:

through executing instruction to transfer securities, submitted by the Clearing Member using the Clearing System;

due to fulfillment of the Request for securities transfer, submitted by the Clearing Member using the Clearing System.

In case if Clearing Member posts foreign currency and/or securities as Concentration Risk Mitigation Collateral, NCC reevaluates such assets every Settlement Day and trigger Margin Call.

In respect of the Concentration Risk Mitigation Collateral limit for triggering Margin Call is not applicable.

Specifics

1. Default Funds Trade Accounts / Collateral for Stress Trade Accounts / Trade Accounts for Concentration Risk Mitigation Collateral are not used for execution of trades by Clearing Members.

2. Clearing Members can transfer cash funds between Default Funds Settlement Account / Collateral for Stress Settlement Account / Settlement Account for recording Concentration Risk Mitigation Collateral and proprietary Settlement Accounts, registered on the securities market, via the Trading System of the securities market, and via MTRNRQ request forwarded via EDI.
Cash funds from default funds / collateral for stress / Concentration Risk Mitigation Collateral can be withdrawn by the Clearing Member via EDI or S.W.I.F.T. to details registered earlier.

3. Clearing Member credits securities as default fund contribution / Collateral for stress / Concentration Risk Mitigation Collateral by transferring such securities from proprietary trading section to the depo sub-account of default funds / depo sub-account for Collateral for Stress / depo sub-account for Concentration Risk Mitigation Collateral via Trading-Clearing System of the securities market.

4. ПWhen transferring securities to the clearing depo account of NCC, ownership of securities is not transferred from Clearing Members to NCC. NSD keeps record of securities’ ownership under depo sub-accounts, opened under clearing depo accounts of NCC for each Clearing Member. Clearing Member can exercise all rights given by the security (including income receipt) in respect of securities, credited to depo sub-account of the clearing depo account of NCC.