New-MIC Stress Test and Default Fund

Transcript

1 New-MIC Stress Test and Default Fund May 30 th, 2014 Version 1.0

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3 Contents 1.0 Introduction Stress Testing 5

4 May 30th, 2014 MIC -Guarantee System and Collateral 1.0 Introduction The New-MIC Stress Test framework considers extreme but plausible variations of the risk factors, larger than those covered by haircuts, but reasonably possible because based on potential future scenarios founded on assumptions regarding market trend. In defining stress scenarios, CC&G considers an hypothetical decrease of the price of all guarantees posted, as per defined in the second section of this document. In line with the provisions of EMIR Regulation s 1, CC&G calibrates the Default Fund ( Calculated Default Fund ) amount at least on the level of the Non-Collateralized Exposure of the first 2 most exposed Participants (2 members with highest Non Collateralized Exposure). Each Participant contributes pro Quota to the Default Fund by an amount based on the ratio between the average of its Net Exposure on a given reference period and the average of the Total Net Exposure on the same reference period. A Minimum Contribution Quota is set and published on the parameters section of the website. The Contribution Quota to the Default Fund must be posted in cash (Euro only). In the section New-MIC - Parameters of the CC&G s website will be published both the total amount of the Default Fund and the other parameters used for the calculation of the Contribution Quota. 1 For more details, please refer to EMIR Regulation Art.42 (point 3) and Art.43 (point 2). 4

5 May 30th, Stress Testing The purpose of the Stress Test is the determination of the Non Collateralized Exposure (NCE) for each Member. The Non Collateralized Exposure will be calculated, on a daily basis,under the assumption that Participants have deposited an amount of financial instruments subjected to stressed market conditions. Every day, for each Member (t), CC&G calculates the Non Collateralized Exposure (NCE t ) as the difference (if greater than zero) between the Net Exposure of the Member on New-MIC (EN t ) and the Stressed Value of the guarantees deposited by the same Member (GS t ). The Stressed Guarantees Value of a Clearing Member (GS t ) is calculated under the hypothetical assumption that in stressed market conditions, the prices of each deposited financial instrument decrease by a multiplier times the related haircut. This multiplier is currently set at a level of 1.2. This level has been defined so as to be in line with the hypothetical stress test scenarios set for the bonds section. Given a financial instrument (i), under extreme but plausible market conditions, its price is subjected to a downward shock: PS i = PH i (1- M H i ) Where: PS i = Stressed price of the instrument i PH i = Price of the instrument i, including haircut. This is the price currently used in the valuation of posted guarantees. It is equal to: P i (1 - H i ) P i = Market Price of the instrument i M = Parametric Stress Multiplier H i = Haircut of the instrument i In stress tests, the total usable countervalue of the guarantees deposited by the Participant t (GS t ), is calculated using the stressed prices calculated as per the above description and applying the same rules and limits used in the daily collateral evaluation. 5

6 May 30th, 2014 The Non Collateralized Exposure (NCE t ) for each Participant t is therefore calculated as: NCE t = max {(EN t GS t ); 0} Where: EN t = Daily Participant s Exposure (inclusive of all positions that liquidate overnight); GS t = Stressed usable countervalue of the deposited instruments. 6

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8 Maggio Il presente documento è adottato a norma delle leggi speciali. Cassa di Compensazione e Garanzia S.p.A. non deve essere ritenuta responsabile per eventuali danni, derivanti anche da imprecisioni e/o errori, che possano derivare all utente e/o a terzi dall uso dei dati contenuti nel presente documento. AGREX, BORSA ITALIANA, BORSA ITALIANA ITALIAN STOCK EXCHANGE, BORSA VIRTUALE, BORSAM@T, CITY FOR GOOD, DDM, ELITE, ETFplus, EUROMOT, EXPANDI, EXTRAMOT, IDEM-THE ITALIAN DERIVATIVES MARKET, IDEX, MIB, MIB 30, MIBTEL, MIDEX, MINIFIB, MIV, MOT, MTA, MTF, NIS, SEDEX, STAR, STAR SEGMENTO TITOLI CON ALTI REQUISITI, TECHSTAR nonché il marchio figurativo costituito da tre losanghe in obliquo sono marchi registrati di proprietà di Borsa Italiana S.p.A. CC&G è un marchio registrato di proprietà di Cassa di Compensazione e Garanzia S.p.A. MONTE TITOLI, X-TRM e MT-X sono marchi registrati di proprietà di Monte Titoli S.p.A. MTS, BOND VISION, EUROMTS sono marchi registrati di proprietà di MTS S.p.A. PALAZZO MEZZANOTTE CONGRESS CENTRE AND SERVICES, BEST VENUE INDICATOR, MARKET CONNECT sono marchi registrati di proprietà di BIt Market Services S.p.A. London Stock Exchange ed il relativo logo, nonché AIM sono marchi registrati di proprietà di London Stock Exchange plc. FTSE è un marchio registrato di proprietà del Gruppo London Stock Exchange ed è utilizzato da FTSE International Limited sotto licenza. GATElab, Traderpath, Algorithmicpath, Exchangepath sono marchi registrati di proprietà di Gatelab S.r.l. I suddetti marchi registrati, nonché gli ulteriori marchi di proprietà del Gruppo London Stock Exchange, non possono essere utilizzati senza il preventivo consenso scritto della società del Gruppo proprietaria del marchio. Il Gruppo promuove e offre i servizi Post Negoziazione prestati da Cassa di Compensazione e Garanzia S.p.A. e da Monte Titoli S.p.A., secondo modalità eque, trasparenti e non discriminatorie e sulla base di criteri e procedure che assicurano l'interoperabilità, la sicurezza e la parità di trattamento tra infrastrutture di mercato, a tutti i soggetti che ne facciano domanda e siano a ciò qualificati in base alle norme nazionali e comunitarie e alle regole vigenti nonché alle determinazioni delle competenti Autorità. Contact Details Risk Management rm.group@lseg.com Cassa di Compensazione e Garanzia S.p.A. Via Tomacelli, Roma