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Intraday Risk Management

INTRADAY RISK MANAGEMENT

BME CLEARING measures risk exposure to its counterparties in real time using its risk management system.

Intraday Risk (current exposure plus potential future exposure) for Positions in approximately 4,000 active accounts opened at the CCP is recalculated every five minutes. In each calculation, current collateral posted is considered: cash in TARGET2-Banco de España or assets posted in IBERCLEAR, CLEARSTREAM or EUROCLEAR, at account level or Clearing Member level.

Valuations shall be made using the last trading price available published on REUTERS’ website, updated every 15 minutes, and applying the corresponding haircut published in BME CLEARING Circular Valuation of assets posted as collateral.

The CCP shall not request additional intraday collateral:

-          Provided that the intraday risk is covered by the Intraday Risk Limit

-          While the Margin Call Limit is not reached, which is referred to as the Margin Call level (80% of margin interval).

The Intraday Risk Limit is the maximum that a Clearing Member may owe the CCP during a trading session.

A Clearing Member’s Intraday Risk Limit is determined by its Member Solvency Limit for the Intraday Risk Limit, equal to between 5% and 10% of its capital, depending on the Member’s solvency, subject to a number of caps published in BME CLEARING Circular Intraday risk limit.

The Clearing Member’s Solvency Limit, plus Individual Funds and Margin Calls delimits the Intraday Risk Limit.

Intraday Risk includes concentration risk. If a Position in an underlying exceeds the Daily Average Volume – a threshold defined in this Circular, greater collateral requirements are considered. Haircuts applied at the time of a valuation shall take into account real-time concentration risk.

In order to limit the intraday margins to be established by each Member and if a situation of high volatility or stress occurs in the following session, BME CLEARING stress the Intraday Risk Limit, simulating the Intraday Risk arising in the next session if a Margin Call is made in that session, i.e. if prices exceed 80% of the level of the margin intervals, pursuant to BME CLEARING’s Circular on “Extraordinary margin request scenarios”.

Each Member has a Margin Call Limit which is equal to the Solvency Limit for the Margin Call Limit plus its Individual Fund. If the theoretical Margin Call exceeds the Margin Call Limit, the Member must deposit an additional Individual Fund.

Any change in a Clearing Member’s solvency or capital affecting its Solvency Limit shall be immediately recorded by the CCP’s system.

Solvency is monitored in real time. Capital shall be limited according to the market capitalization calculated daily.

 

 

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